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COF Capital One Financial

Filed: 5 Nov 21, 3:38pm
0000927628us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-Q
____________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File No. 001-13300
____________________________________
CAPITAL ONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter) 
____________________________________
Delaware 54-1719854
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1680 Capital One Drive,
McLean,Virginia 22102
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (703) 720-1000
(Not Applicable)
(Former name, former address and former fiscal year, if changed since last report)
____________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock (par value $.01 per share)COFNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series GCOF PRGNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series HCOF PRHNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series ICOF PRINew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series JCOF PRJNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series KCOF PRKNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series LCOF PRLNew York Stock Exchange
Depositary Shares, Each Representing a 1/40th Interest in a Share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series NCOF PRNNew York Stock Exchange
0.800% Senior Notes Due 2024COF24New York Stock Exchange
1.650% Senior Notes Due 2029COF29New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 
As of October 29, 2021, there were 425,622,058 shares of the registrant’s Common Stock outstanding.



TABLE OF CONTENTS
Page
1Capital One Financial Corporation (COF)


2Capital One Financial Corporation (COF)


INDEX OF MD&A AND SUPPLEMENTAL TABLE
Page
1
2
3
4
5
6
7
8
9
10
10.1
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Allowance Coverage Ratios for Specified Loan Category
31
32
33
34
35
A
3Capital One Financial Corporation (COF)

PART I—FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
This discussion contains forward-looking statements that are based upon management’s current expectations and are subject to significant uncertainties and changes in circumstances. Please review “MD&A—Forward-Looking Statements” for more information on the forward-looking statements in this Quarterly Report on Form 10-Q (“this Report”). All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including those relating to operating results and “Note 13—Commitments, Contingencies, Guarantees and Others” as well as the potential impacts of the COVID-19 pandemic described in “MD&A—Introduction—Coronavirus Disease 2019 (COVID-19) Pandemic” are forward-looking statements. Our actual results may differ materially from those included in these forward-looking statements due to a variety of factors including, but not limited to, those described in “Part I—Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K (“2020 Form 10-K”) and “Part II—Item 1A. Risk Factors” in this Report. Unless otherwise specified, references to notes to our consolidated financial statements refer to the notes to our consolidated financial statements as of September 30, 2021 included in this Report.
Management monitors a variety of key indicators to evaluate our business results and financial condition. The following MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and related notes in this Report and the more detailed information contained in our 2020 Form 10-K.
INTRODUCTION
Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the “Company”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branches, Cafés and other distribution channels.
As of September 30, 2021, our principal subsidiaries included:
Capital One Bank (USA), National Association (“COBNA”), which offers credit card products along with other lending products and consumer services; and
Capital One, National Association (“CONA”), which offers a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.
The Company is hereafter collectively referred to as “we,” “us” or “our.” COBNA and CONA are collectively referred to as the “Banks.” Certain business terms used in this document are defined in the “MD&A—Glossary and Acronyms” and should be read in conjunction with the consolidated financial statements included in this Report.
Our consolidated total net revenues are derived primarily from lending to consumer, small business and commercial customers net of funding costs associated with interest on deposits, long-term debt and other borrowings. We also earn non-interest income which primarily consists of interchange income, net of reward expenses, service charges and other customer-related fees. Our expenses primarily consist of the provision for credit losses, operating expenses, marketing expenses and income taxes.
Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.
Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in Canada and the United Kingdom (“U.K.”).
4Capital One Financial Corporation (COF)

Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.
Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our commercial and industrial customers typically include companies with annual revenues between $20 million and $2 billion.
Business Developments
We regularly explore and evaluate opportunities to acquire financial services and products as well as financial assets, including credit card and other loan portfolios, and enter into strategic partnerships as part of our growth strategy. We also explore opportunities to acquire technology companies and related assets to improve our information technology infrastructure and to deliver on our digital strategy. We may issue equity or debt to fund our acquisitions. In addition, we regularly consider the potential disposition of certain assets, branches, partnership agreements or lines of business.
Coronavirus Disease 2019 (COVID-19) Pandemic
The COVID-19 pandemic resulted in a global public-health crisis, disrupting economies and introducing significant volatility into financial markets. We transformed how we work in order to protect the well-being of our associates and our customers, and were able to continue to serve our customers, successfully manage critical functions, and keep our lines of business operating.
Since the start of the COVID-19 pandemic, a significant majority of our associates across our workforce have transitioned to working remotely, relying on our technology infrastructure and systems that have been designed for resilience and security. The majority of our associates continue to work remotely. In the future, we plan to adopt a hybrid work methodology that allows for in-office collaboration while still enabling associates to work remotely. We continue to monitor local conditions to ensure the safety of our associates.
For more information see “Part I—Item 1. Business—Overview—Coronavirus Disease 2019 (COVID-19) Pandemic” and “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K along with “Part I—Item 2. MD&A—Introduction—Coronavirus Disease 2019 (COVID-19) Pandemic” and “Part I—Item 2. MD&A—Credit Risk Profile—COVID-19 Customer Assistance Programs and Loan Modifications” in our Quarterly Report on Form 10-Q for the period ended March 31, 2021.
5Capital One Financial Corporation (COF)

SELECTED FINANCIAL DATA
The following table presents selected consolidated financial data and performance from our results of operations for the third quarter and first nine months of 2021 and 2020 and selected comparative balance sheet data as of September 30, 2021 and December 31, 2020. We also provide selected key metrics we use in evaluating our performance, including certain metrics that are computed using non-GAAP measures. We consider these metrics to be key financial measures that management uses in assessing our operating performance, capital adequacy and the level of returns generated. We believe these non-GAAP metrics provide useful insight to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated.
Table 1: Consolidated Financial Highlights
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)20212020Change20212020Change
Income statement
Net interest income$6,156 $5,555 11%$17,721 $17,040 4%
Non-interest income1,674 1,826 (8)4,596 4,146 11
Total net revenue7,830 7,381 622,317 21,186 5
Provision (benefit) for credit losses(342)331 **(2,325)10,000 **
Non-interest expense:
Marketing751 283 1651,872 1,047 79
Operating expense3,435 3,265 510,020 10,000 
Total non-interest expense4,186 3,548 1811,892 11,047 8
Income from continuing operations before income taxes3,986 3,502 1412,750 139 **
Income tax provision (benefit)882 1,096 (20)2,782 (10)**
Income from continuing operations, net of tax3,104 2,406 299,968 149 **
Loss from discontinued operations, net of tax — (3)(1)**
Net income3,104 2,406 299,965 148 **
Dividends and undistributed earnings allocated to participating securities(26)(20)30(84)(5)**
Preferred stock dividends(79)(67)18(200)(212)(6)
Issuance cost for redeemed preferred stock(12)— **(12)(22)(45)
Net income (loss) available to common stockholders$2,987 $2,319 29$9,669 $(91)**
Common share statistics 
Basic earnings per common share:
Net income (loss) from continuing operations$6.81 $5.07 34%$21.53 $(0.20)**
Loss from discontinued operations — (0.01)— **
Net income (loss) per basic common share$6.81 $5.07 34$21.52 $(0.20)**
Diluted earnings per common share:
Net income (loss) from continuing operations$6.78 $5.06 34%$21.45 $(0.20)**
Loss from discontinued operations — (0.01)— **
Net income (loss) per diluted common share$6.78 $5.06 34$21.44 $(0.20)**
Weighted-average common shares outstanding (in millions):
Basic438.8 457.8 (4)%449.2 457.4 (2)%
Diluted440.5 458.5 (4)450.9 457.4 (1)
Common shares outstanding (period-end, in millions)430.4 457.4 (6)430.4 457.4 (6)
Dividends declared and paid per common share$1.20 $0.10 **$2.00 $0.90 122
Tangible book value per common share (period-end)(1)
99.60 83.67 1999.60 83.67 19
6Capital One Financial Corporation (COF)

Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except per share data and as noted)20212020Change20212020Change
Balance sheet (average balances)
Loans held for investment$253,101 $249,511 1%$247,867 $255,232 (3)%
Interest-earning assets387,766 391,451 (1)388,820 375,041 4
Total assets424,506 422,854 — 423,457 408,233 
Interest-bearing deposits269,278 276,339 (3)272,022 259,631 
Total deposits305,035 305,516 — 306,102 286,242 
Borrowings37,464 44,161 (15)38,134 48,577 (21)
Common equity58,230 51,995 12 56,972 52,529 
Total stockholders’ equity64,682 57,223 13 62,575 57,802 
Selected performance metrics 
Purchase volume$136,614 $107,102 28 %$377,623 $297,171 27 %
Total net revenue margin(2)
8.08 %7.54 %54 bps7.65 %7.53 %12 bps
Net interest margin6.35 5.68 67 6.08 6.06 
Return on average assets(3)
2.92 2.28 64 3.14 0.05 309 
Return on average tangible assets(4)
3.03 2.36 67 3.25 0.05 320 
Return on average common equity(5)
20.52 17.84 268 22.64 (0.23)23 %
Return on average tangible common equity(6)
27.50 24.98 252 30.57 (0.32)31 
Equity-to-assets ratio(7)
15.24 13.53 171 14.78 14.16 62 bps
Non-interest expense as a percentage of average loans held for investment6.62 5.69 93 6.40 5.77 63 
Efficiency ratio(8)
53.46 48.07 %53.29 52.14 115 
Operating efficiency ratio(9)
43.87 44.24 (37)bps44.90 47.20 (230)
Effective income tax rate from continuing operations22.1 31.3 (9)%21.8 (7.2)29 %
Net charge-offs$426 $1,073 (60)$1,707 $4,369 (61)
Net charge-off rate0.67 %1.72 %(105)bps0.92 %2.28 %(136)bps
(Dollars in millions, except as noted)September 30, 2021December 31, 2020Change
Balance sheet (period-end)
Loans held for investment$261,390 $251,624 %
Interest-earning assets387,208 388,917 — 
Total assets425,377 421,602 
Interest-bearing deposits269,134 274,300 (2)
Total deposits305,938 305,442 — 
Borrowings37,501 40,539 (7)
Common equity57,632 55,356 
Total stockholders’ equity63,544 60,204 
Credit quality metrics
Allowance for credit losses$11,573 $15,564 (26)%
Allowance as a percentage of loans held for investment (“allowance coverage ratio”)4.43 %6.19 %(176)bps
30+ day performing delinquency rate1.97 2.41 (44)
30+ day delinquency rate2.13 2.61 (48)
Capital ratios
Common equity Tier 1 capital(10)
13.8 %13.7 %10 bps
Tier 1 capital(10)
15.7 15.3 40 
Total capital(10)
18.2 17.7 50 
Tier 1 leverage(10)
12.2 11.2 100 
Tangible common equity(11)
10.4 10.0 40 
Supplementary leverage(10)(12)
10.4 10.7 (30)
Other
Employees (period end, in thousands)50.8 52.0 (2)
7Capital One Financial Corporation (COF)

__________
(1)Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See “MD&A—Table A —Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(2)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.
(3)Return on average assets is calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period.
(4)Return on average tangible assets is a non-GAAP measure calculated based on annualized income from continuing operations, net of tax, for the period divided by average tangible assets for the period. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(5)Return on average common equity is calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average common equity. Our calculation of return on average common equity may not be comparable to similarly-titled measures reported by other companies.
(6)Return on average tangible common equity (“TCE”) is a non-GAAP measure calculated based on annualized net income (loss) available to common stockholders less annualized income (loss) from discontinued operations, net of tax, for the period, divided by average tangible common equity. Our calculation of return on average TCE may not be comparable to similarly-titled measures reported by other companies. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for additional information on non-GAAP measures.
(7)Equity-to-assets ratio is calculated based on average stockholders’ equity for the period divided by average total assets for the period.
(8)Efficiency ratio is calculated based on total non-interest expense for the period divided by total net revenue for the period.
(9)Operating efficiency ratio is calculated based on operating expense for the period divided by total net revenue for the period.
(10)Capital ratios are calculated based on the Basel III Standardized Approach framework, see “MD&A—Capital Management” for additional information.
(11)Tangible common equity ratio is a non-GAAP measure calculated based on TCE divided by tangible assets. See “MD&A—Table A—Reconciliation of Non-GAAP Measures” for the calculation of this measure and reconciliation to the comparative U.S. GAAP measure.
(12)The Company’s supplementary leverage ratio as of December 31, 2020 reflected the temporary exclusions of U.S Treasury securities and deposits at Federal Reserve Banks from the denominator of the supplementary leverage ratio. See “Part I—Item 1. Business—Supervision and Regulation—Capital and Liquidity Regulation” in our 2020 Form 10-K for additional details.
**    Not meaningful.
8Capital One Financial Corporation (COF)

EXECUTIVE SUMMARY AND BUSINESS OUTLOOK
Financial Highlights
We reported net income of $3.1 billion ($6.78 per diluted common share) on total revenue of $7.8 billion and net income of $10.0 billion ($21.44 per diluted common share) on total net revenue of $22.3 billion for the third quarter and first nine months of 2021. In comparison, we reported net income of $2.4 billion ($5.06 per diluted common share) on total net revenue of $7.4 billion and net income of $148 million (which after considering preferred stock dividends and other items equated to a net loss of $0.20 per diluted common share) on total net revenue of $21.2 billion for the third quarter and first nine months of 2020.
Our common equity Tier 1 capital ratio as calculated under the Basel III Standardized Approach was 13.8% and 13.7% as of September 30, 2021 and December 31, 2020, respectively. See “MD&A—Capital Management” for additional information.
On January 25, 2021, our Board of Directors authorized the repurchase of up to $7.5 billion of shares of our common stock. We repurchased approximately $2.7 billion of shares of our common stock during the third quarter of 2021 and $4.9 billion during the first nine months of 2021. See “MD&A—Capital Management—Dividend Policy and Stock Purchases” for additional information.
Below are additional highlights of our performance in the third quarter and first nine months of 2021. These highlights are based on a comparison between the results of the third quarter and first nine months of 2021 and 2020, except as otherwise noted. The changes in our financial condition and credit performance are generally based on our financial condition and credit performance as of September 30, 2021 compared to December 31, 2020. We provide a more detailed discussion of our financial performance in the sections following this “Executive Summary and Business Outlook.”
Total Company Performance
Earnings:
Our net income increased by $698 million to $3.1 billion in the third quarter of 2021 primarily driven by:
lower provision resulting from an allowance release primarily due to strong credit performance; and
higher net interest income primarily driven by higher margins and average loans outstanding in our credit card loan portfolio and higher average loans outstanding in our auto loan portfolio.
These drivers were partially offset by higher non-interest expense, primarily driven by increased marketing spend.
Our net income increased by $9.8 billion to $10.0 billion in the first nine months of 2021 primarily driven by:
lower provision resulting from allowance releases in 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic;
higher net interest income driven by lower interest rates paid on interest-bearing deposits and higher average outstanding balances in our auto loan portfolio; and
higher non-interest income primarily driven by higher net interchange fees due to an increase in purchase volume, partially offset by the absence of a gain on our equity investment in Snowflake Inc.
These drivers were partially offset by higher non-interest expense, primarily driven by increased marketing spend.
Loans Held for Investment:
Period-end loans held for investment increased by $9.8 billion to $261.4 billion as of September 30, 2021 from December 31, 2020 primarily driven by growth in our auto and commercial loan portfolios, partially offset by the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021.
Average loans held for investment increased by $3.6 billion to $253.1 billion in the third quarter of 2021 compared to the third quarter of 2020 primarily driven by growth in our auto loan portfolio, partially offset by the
9Capital One Financial Corporation (COF)

transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021. Average loans held for investment decreased by $7.4 billion to $247.9 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by lower outstanding balances in Credit Card due to higher customer payments, partially offset by higher purchase volume as well as growth in our auto loan portfolio.
Net Charge-Off and Delinquency Metrics: Our net charge-off rate decreased by 105 basis points (“bps”) to 0.67% in the third quarter of 2021 compared to the third quarter of 2020 and decreased by 136 basis points to 0.92% in the first nine months of 2021 compared to the first nine months of 2020, primarily driven by strong credit performance in Credit Card.
Our 30+ day delinquency rate decreased by 48 basis points to 2.13% as of September 30, 2021 from December 31, 2020 due to strong credit performance in our credit card and auto loan portfolios.
Allowance for Credit Losses: Our allowance for credit losses decreased by $4.0 billion to $11.6 billion, and our allowance coverage ratio decreased by 176 basis points to 4.43% as of September 30, 2021 from December 31, 2020, driven by strong credit performance and improved economic outlook.
Business Outlook
We discuss in this Report our expectations as of the time this Report was filed regarding our total company performance and the performance of our business segments based on market conditions, the regulatory environment and our business strategies. The statements contained in this Report are based on our current expectations regarding our outlook for our financial results and business strategies. Our expectations take into account, and should be read in conjunction with, our expectations regarding economic trends and analysis of our business as discussed in “Part I—Item 1. Business” and “Part II—Item 7. MD&A” in our 2020 Form 10-K. Certain statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those in our forward-looking statements. Except as otherwise disclosed, forward-looking statements do not reflect:
any change in current dividend or repurchase strategies;
the effect of any acquisitions, divestitures or similar transactions that have not been previously disclosed; or
any changes in laws, regulations or regulatory interpretations, in each case after the date as of which such statements are made.
The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations, and financial condition will depend on future developments that are still uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the COVID-19 pandemic.
See “MD&A—Forward-Looking Statements” in this Report for more information on the forward-looking statements and “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K for factors that could materially influence our results.
Total Company Expectations
We expect marketing expense for the fourth quarter of 2021 to be higher than the third quarter of 2021, consistent with historical seasonal patterns.
Investments in our technology strategy, driven by the rapidly changing marketplace, are likely to pressure the operating efficiency ratio.
We expect to pay preferred stock dividends of $74 million in the fourth quarter of 2021 and $57 million per quarter in 2022, barring additional activity and subject to Board approval.


10Capital One Financial Corporation (COF)

CONSOLIDATED RESULTS OF OPERATIONS
The section below provides a comparative discussion of our consolidated financial performance for the third quarter and first nine months of 2021 and 2020. We provide a discussion of our business segment results in the following section, “MD&A—Business Segment Financial Performance.” This section should be read together with our “MD&A—Executive Summary and Business Outlook,” where we discuss trends and other factors that we expect will affect our future results of operations.
Net Interest Income
Net interest income represents the difference between interest income, including certain fees, earned on our interest-earning assets and the interest expense incurred on our interest-bearing liabilities. Our interest-earning assets include loans, investment securities and other interest-earning assets, while our interest-bearing liabilities include interest-bearing deposits, securitized debt obligations, senior and subordinated notes, other borrowings and other interest-bearing liabilities. Generally, we include in interest income any past due fees on loans that we deem collectible. Our net interest margin, based on our consolidated results, represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities, including the notional impact of non-interest-bearing funding. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.

11Capital One Financial Corporation (COF)

Table 2 below presents the average outstanding balance, interest income earned, interest expense incurred and average yield for the third quarter and first nine months of 2021 and 2020 for each major category of our interest-earning assets and interest-bearing liabilities. Nonperforming loans are included in the average loan balances below.
Table 2: Average Balances, Net Interest Income and Net Interest Margin
 Three Months Ended September 30,
 20212020
(Dollars in millions)Average
Balance
Interest Income/
Expense
Average Yield/
Rate
Average
Balance
Interest Income/
Expense
Average Yield/
Rate
Assets:
Interest-earning assets:
Loans:(1)
Credit card$106,566 $3,965 14.88 %$105,390 $3,644 13.83 %
Consumer banking75,997 1,479 7.78 67,822 1,417 8.36 
Commercial banking(2)
77,672 538 2.77 77,313 544 2.82 
Other(3)
 223 **— 153 **
Total loans, including loans held for sale260,235 6,205 9.54 250,525 5,758 9.19 
Investment securities(4)
98,802 317 1.28 91,777 443 1.93 
Cash equivalents and other interest-earning assets28,729 16 0.22 49,149 14 0.11 
Total interest-earning assets387,766 6,538 6.74 391,451 6,215 6.35 
Cash and due from banks5,467 4,697 
Allowance for credit losses(12,341)(16,839)
Premises and equipment, net4,238 4,319 
Other assets39,376 39,226 
Total assets$424,506 $422,854 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$269,278 $228 0.34 %$276,339 $476 0.69 %
Securitized debt obligations12,420 29 0.93 15,032 43 1.14 
Senior and subordinated notes24,241 116 1.91 28,497 132 1.86 
Other borrowings and liabilities2,357 9 1.49 2,119 1.77 
Total interest-bearing liabilities308,296 382 0.49 321,987 660 0.82 
Non-interest-bearing deposits35,757 29,177 
Other liabilities15,771 14,467 
Total liabilities359,824 365,631 
Stockholders’ equity64,682 57,223 
Total liabilities and stockholders’ equity$424,506 $422,854 
Net interest income/spread$6,156 6.25 $5,555 5.53 
Impact of non-interest-bearing funding0.10 0.15 
Net interest margin6.35 %5.68 %
12Capital One Financial Corporation (COF)

 Nine Months Ended September 30,
 20212020
(Dollars in millions)Average
Balance
Interest Income/
Expense
Average Yield/
Rate
Average
Balance
Interest Income/
Expense
Average Yield/
Rate
Assets:
Interest-earning assets:
Loans:(1)
Credit card$103,591 $11,246 14.47 %$112,305 $11,812 14.02 %
Consumer banking72,670 4,343 7.97 65,457 4,128 8.41 
Commercial banking(2)
75,852 1,564 2.75 78,403 1,898 3.23 
Other(3)
 659 **— 282 **
Total loans, including loans held for sale252,113 17,812 9.42 256,165 18,120 9.43 
Investment securities99,059 1,078 1.45 83,724 1,455 2.32 
Cash equivalents and other interest-earning assets37,648 48 0.17 35,152 67 0.25 
Total interest-earning assets388,820 18,938 6.49 375,041 19,642 6.98 
Cash and due from banks5,300 4,913 
Allowance for credit losses(13,954)(13,796)
Premises and equipment, net4,265 4,332 
Other assets39,026 37,743 
Total assets$423,457 $408,233 
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
Interest-bearing deposits$272,022 $734 0.36 %$259,631 $1,818 0.93 %
Securitized debt obligations11,851 89 1.00 16,500 198 1.60 
Senior and subordinated notes25,555 367 1.92 30,371 551 2.42 
Other borrowings and liabilities2,256 27 1.59 3,147 35 1.50 
Total interest-bearing liabilities311,684 1,217 0.52 309,649 2,602 1.12 
Non-interest-bearing deposits34,080 26,611 
Other liabilities15,118 14,171 
Total liabilities360,882 350,431 
Stockholders’ equity62,575 57,802 
Total liabilities and stockholders’ equity$423,457 $408,233 
Net interest income/spread$17,721 5.97 $17,040 5.86 
Impact of non-interest-bearing funding0.11 0.20 
Net interest margin6.08 %6.06 %
__________
(1)Past due fees included in interest income totaled approximately $401 million and $1.0 billion in the third quarter and first nine months of 2021, respectively, and $277 million and $933 million in the third quarter and first nine months of 2020, respectively.
(2)Some of our commercial loans generate tax-exempt income. Accordingly, we present our Commercial Banking interest income and yields on a taxable-equivalent basis, calculated using the federal statutory rate of 21% and state taxes where applicable, with offsetting reductions to the Other category. Taxable-equivalent adjustments included in the interest income and yield computations for our commercial loans totaled approximately $18 million and $56 million in the third quarter and first nine months of 2021, respectively, and $20 million and $61 million in the third quarter and first nine months of 2020, respectively, with corresponding reductions to the Other category.
(3)Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.
(4)Includes a catch-up in amortization expense related to prepayment activity on certain securities that reduced yield by 20 basis points for the three months ended September 30, 2021.
**    Not meaningful.
Net interest income increased by $601 million to $6.2 billion in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by higher margins and average loans outstanding in our credit card loan portfolio and higher average loans outstanding in our auto loan portfolio. Net interest income increased by $681 million to $17.7 billion in the first nine months of
13Capital One Financial Corporation (COF)

2021 compared to the first nine months of 2020 primarily driven by lower interest rates paid on interest-bearing deposits and higher average outstanding balances in our auto loan portfolio.
Net interest margin increased by 67 basis points to 6.35% in the third quarter of 2021 compared to the third quarter of 2020 primarily driven by lower interest rates paid on interest-bearing liabilities, higher average loan balances and lower average cash balances, partially offset by higher average investment securities balances. Net interest margin remained relatively flat at 6.08% in the first nine months of 2021 compared to the first nine months of 2020.
Table 3 displays the change in our net interest income between periods and the extent to which the variance is attributable to:
changes in the volume of our interest-earning assets and interest-bearing liabilities; or
changes in the interest rates related to these assets and liabilities.
Table 3: Rate/Volume Analysis of Net Interest Income(1)
Three Months Ended September 30,Nine Months Ended September 30,
 2021 vs. 20202021 vs. 2020
(Dollars in millions)Total VarianceVolumeRateTotal VarianceVolumeRate
Interest income:
Loans:
Credit card$321 $41 $280 $(566)$(917)$351 
Consumer banking62 159 (97)215 431 (216)
Commercial banking(2)
(6)2 (8)(334)(60)(274)
Other(3)
70  70 377  377 
Total loans, including loans held for sale447 202 245 (308)(546)238 
Investment securities(126)23 (149)(377)167 (544)
Cash equivalents and other interest-earning assets2 (6)8 (19)3 (22)
Total interest income323 219 104 (704)(376)(328)
Interest expense:
Interest-bearing deposits(248)(12)(236)(1,084)33 (1,117)
Securitized debt obligations(14)(7)(7)(109)(45)(64)
Senior and subordinated notes(16)(20)4 (184)(79)(105)
Other borrowings and liabilities 1 (1)(8)(10)2 
Total interest expense(278)(38)(240)(1,385)(101)(1,284)
Net interest income$601 $257 $344 $681 $(275)$956 
__________
(1)We calculate the change in interest income and interest expense separately for each item. The portion of interest income or interest expense attributable to both volume and rate is allocated proportionately when the calculation results in a positive value. When the portion of interest income or interest expense attributable to both volume and rate results in a negative value, the total amount is allocated to volume or rate, depending on which amount is positive.
(2)Some of our commercial loans generate tax-exempt income. Accordingly, we present our Commercial Banking interest income and yields on a taxable-equivalent basis, calculated using the federal statutory rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(3)Interest income/expense in the Other category represents the impact of hedge accounting on our loan portfolios and the offsetting reduction of the taxable-equivalent adjustments of our commercial loans as described above.
14Capital One Financial Corporation (COF)

Non-Interest Income
Table 4 displays the components of non-interest income for the third quarter and first nine months of 2021 and 2020.
Table 4: Non-Interest Income
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Interchange fees, net$1,022 $775 $2,855 $2,199 
Service charges and other customer-related fees407 320 1,143 905 
Net securities gains (losses)2 25 6 25 
Other non-interest income:(1)
Mortgage banking revenue84 66 184 172 
Treasury and other investment income50 516 128 572 
Other109 124 280 273 
Total other non-interest income243 706 592 1,017 
Total non-interest income$1,674 $1,826 $4,596 $4,146 
________
(1)Includes a loss of $1 million and a gain of $44 million on deferred compensation plan investments for the third quarter and first nine months of 2021, respectively, and gains of $19 million and $4 million on deferred compensation plan investments for the third quarter and first nine months of 2020, respectively. These amounts have corresponding offsets in other non-interest expense.
Non-interest income decreased by $152 million to $1.7 billion in the third quarter of 2021 compared to the third quarter of 2020 primarily driven by the absence of a gain on our equity investment in Snowflake Inc. in the third quarter of 2020, partially offset by higher net interchange fees due to an increase in purchase volume.
Non-interest income increased by $450 million to $4.6 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by higher net interchange fees due to an increase in purchase volume, partially offset by the absence of a gain on our equity investment in Snowflake Inc.
Provision for Credit Losses
Our provision for credit losses in each period is driven by net charge-offs, changes to the allowance for credit losses and changes to the reserve for unfunded lending commitments. Our provision for credit losses decreased by $673 million to a benefit of $342 million in the third quarter of 2021 compared to the third quarter of 2020 driven by an allowance release primarily due to strong credit performance. Our provision for credit losses decreased by $12.3 billion to a benefit of $2.3 billion in the first nine months of 2021 as a result of allowance releases in 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.
We provide additional information on the provision for credit losses and changes in the allowance for credit losses within “MD&A—Credit Risk Profile” and “Note 4—Allowance for Credit Losses and Reserve for Unfunded Lending Commitments.” For information on the allowance methodology for each of our loan categories, see “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.
15Capital One Financial Corporation (COF)

Non-Interest Expense
Table 5 displays the components of non-interest expense for the third quarter and first nine months of 2021 and 2020.
Table 5: Non-Interest Expense
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Salaries and associate benefits(1)
$1,852 $1,719 $5,480 $5,050 
Occupancy and equipment481 506 1,476 1,546 
Marketing751 283 1,872 1,047 
Professional services358 327 991 918 
Communications and data processing319 310 936 920 
Amortization of intangibles5 14 16 52 
Other non-interest expense:
Bankcard, regulatory and other fee assessments50 69 140 210 
Collections93 74 272 255 
Fraud losses42 56 117 206 
Other235 190 592 843 
Total other non-interest expense420 389 1,121 1,514 
Total non-interest expense$4,186 $3,548 $11,892 $11,047 
_________
(1)Includes a benefit of $1 million and expense of $44 million related to our deferred compensation plan investments for the third quarter and first nine months of 2021, respectively, and expense of $19 million and $4 million related to our deferred compensation plan investments for the third quarter and first nine months of 2020, respectively. These amounts have corresponding offsets in other non-interest income.
Non-interest expense increased by $638 million to $4.2 billion in the third quarter of 2021 compared to the third quarter of 2020 driven by increased marketing spend and increased salaries and associate benefits due to continued investment in technology.
Non-interest expense increased by $845 million to $11.9 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily driven by increased marketing spend and increased salaries and associate benefits due to continued investment in technology, partially offset by lower legal reserve builds.
Income Taxes
We recorded an income tax provision of $882 million (22.1% effective income tax rate) and $2.8 billion (21.8% effective income tax rate) in the third quarter and first nine months of 2021, respectively, compared to an income tax expense of $1.1 billion (31.3% effective income tax rate) and an income tax benefit of $10 million (negative 7.2% effective income tax rate) in the third quarter and first nine months of 2020, respectively. Our effective tax rate on income from continuing operations varies between periods due, in part, to the impact of changes in pre-tax income and changes in tax credits, tax-exempt income and non-deductible expenses relative to our pre-tax earnings.
Our effective income tax rate decreased for the third quarter of 2021 and increased for the first nine months of 2021 compared to the same periods in 2020 primarily driven by the impact of changes in pre-tax income and the relationship of our tax credits in proportion to our pre-tax earnings.
We provide additional information on items affecting our income taxes and effective tax rate in “Note 15—Income Taxes” in our 2020 Form 10-K.
16Capital One Financial Corporation (COF)

CONSOLIDATED BALANCE SHEETS ANALYSIS
Total assets increased by $3.8 billion to $425.4 billion as of September 30, 2021 from December 31, 2020 primarily driven by loan growth and allowance releases, partially offset by a decrease in our cash balances.
Total liabilities remained substantially flat at $361.8 billion as of September 30, 2021.
Stockholders’ equity increased by $3.3 billion to $63.5 billion as of September 30, 2021 from December 31, 2020 primarily due to our net income of $10.0 billion, partially offset by the repurchase of shares of our common stock.
The following is a discussion of material changes in the major components of our assets and liabilities during the first nine months of 2021. Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities that are intended to support the adequacy of capital while managing our liquidity requirements, our customers and our market risk exposure in accordance with our risk appetite.
Investment Securities
Our investment securities portfolio consists of the following: U.S. government-sponsored enterprise or agency (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”), Agency commercial mortgage-backed securities (“CMBS”), U.S. Treasury securities and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) issued securities. The carrying value of our investments in Agency and U.S. Treasury securities represented 96% of our total investment securities portfolio as of both September 30, 2021 and December 31, 2020.
The fair value of our available for sale securities portfolio decreased by $2.3 billion to $98.1 billion as of September 30, 2021 from December 31, 2020, primarily driven by the increase in interest rates. See “Note 2—Investment Securities” for more information.
Table 6 presents the amortized cost and fair value for the major security types in our available for sale securities portfolio as of September 30, 2021 and December 31, 2020.
Table 6: Investment Securities
September 30, 2021December 31, 2020
(Dollars in millions)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Investment securities available for sale:
U.S. Treasury securities$9,094 $9,109 $9,302 $9,318 
RMBS:
Agency73,924 74,632 73,248 75,466 
Non-agency844 1,049 1,035 1,237 
Total RMBS74,768 75,681 74,283 76,703 
Agency CMBS9,973 10,197 11,298 11,735 
Other securities(1)
3,154 3,162 2,686 2,689 
Total investment securities available for sale$96,989 $98,149 $97,569 $100,445 
__________
(1)Includes $2.3 billion and $1.8 billion of asset-backed securities as of September 30, 2021 and December 31, 2020, respectively. The remaining amount is primarily comprised of supranational bonds and foreign government bonds.
17Capital One Financial Corporation (COF)

Loans Held for Investment
Total loans held for investment consists of both unsecuritized loans and loans held in our consolidated trusts. Table 7 summarizes, by portfolio segment, the carrying value of our loans held for investment, the allowance for credit losses and net loan balance as of September 30, 2021 and December 31, 2020.
Table 7: Loans Held for Investment
 September 30, 2021December 31, 2020
(Dollars in millions)LoansAllowanceNet LoansLoansAllowanceNet Loans
Credit Card$105,030 $8,306 $96,724 $106,956 $11,191 $95,765 
Consumer Banking77,112 2,061 75,051 68,888 2,715 66,173 
Commercial Banking79,248 1,206 78,042 75,780 1,658 74,122 
Total$261,390 $11,573 $249,817 $251,624 $15,564 $236,060 
Loans held for investment increased by $9.8 billion to $261.4 billion as of September 30, 2021 from December 31, 2020 primarily driven by growth in our auto and commercial loan portfolios, partially offset by the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021.
We provide additional information on the composition of our loan portfolio and credit quality in “MD&A—Credit Risk Profile,” “MD&A—Consolidated Results of Operations” and “Note 3—Loans.”
Funding Sources
Our primary source of funding comes from deposits, as they are a stable and relatively low cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes, securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase, and Federal Home Loan Banks (“FHLB”) advances secured by certain portions of our loan and securities portfolios.
Table 8 provides the composition of our primary sources of funding as of September 30, 2021 and December 31, 2020.
Table 8: Funding Sources Composition
September 30, 2021December 31, 2020
(Dollars in millions)Amount% of TotalAmount% of Total
Deposits:
Consumer Banking$252,387 73 %$249,815 72 %
Commercial Banking43,347 13 39,590 11 
Other(1)
10,204 3 16,037 
Total deposits305,938 89 305,442 88 
Securitized debt obligations12,635 4 12,414 
Other debt24,866 7 28,125 
Total funding sources$343,439 100 %$345,981 100 %
__________
(1)Includes brokered deposits of $9.1 billion and $15.0 billion as of September 30, 2021 and December 31, 2020, respectively.
Total deposits increased by $496 million to $305.9 billion as of September 30, 2021 from December 31, 2020 primarily driven by increased consumer savings, as well as commercial clients holding elevated levels of liquidity, partially offset by maturities in brokered deposits.
Securitized debt obligations increased by $221 million to $12.6 billion as of September 30, 2021 from December 31, 2020 primarily driven by issuances in our credit card securitization program, partially offset by maturities and paydowns in our securitization programs.
18Capital One Financial Corporation (COF)

Other debt decreased by $3.3 billion to $24.9 billion as of September 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior debt, partially offset by the issuance of subordinated debt.
We provide additional information on our funding sources in “MD&A—Liquidity Risk Profile” and “Note 7—Deposits and Borrowings.”
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we engage in certain activities that are not reflected on our consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities typically involve transactions with unconsolidated variable interest entities (“VIEs”) as well as other arrangements, such as letters of credit, loan commitments and guarantees, to meet the financing needs of our customers and support their ongoing operations. We provide additional information regarding these types of activities in “Note 5—Variable Interest Entities and Securitizations” and “Note 13—Commitments, Contingencies, Guarantees and Others.”
BUSINESS SEGMENT FINANCIAL PERFORMANCE
Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a segment, such as management of our corporate investment portfolio, asset/liability management by our centralized Corporate Treasury group and calculation of our residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments, are included in the Other category.
The results of our individual businesses, which we report on a continuing operations basis, reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources. We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies and changes in organizational alignment. Our business segment results are intended to reflect each segment as if it were a stand-alone business. We use an internal management and reporting process to derive our business segment results. Our internal management and reporting process employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenue and expenses directly or indirectly attributable to each business segment. Total interest income and non-interest income are directly attributable to the segment in which they are reported. The net interest income of each segment reflects the results of our funds transfer pricing process, which is primarily based on a matched funding concept that takes into consideration market interest rates. Our funds transfer pricing process provides a funds credit for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge for the use of funds by each segment. The allocation process is unique to each business segment and acquired business. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods. We provide additional information on the allocation methodologies used to derive our business segment results in “Note 17—Business Segments and Revenue from Contracts with Customers” in our 2020 Form 10-K.
We refer to the business segment results derived from our internal management accounting and reporting process as our “managed” presentation, which differs in some cases from our reported results prepared based on U.S. GAAP. There is no comprehensive authoritative body of guidance for management accounting equivalent to U.S. GAAP; therefore, the managed presentation of our business segment results may not be comparable to similar information provided by other financial services companies. In addition, our individual business segment results should not be used as a substitute for comparable results determined in accordance with U.S. GAAP.
We summarize our business segment results for the third quarter and first nine months of 2021 and 2020 and provide a comparative discussion of these results, as well as changes in our financial condition and credit performance metrics as of September 30, 2021 compared to December 31, 2020. We provide a reconciliation of our total business segment results to our reported consolidated results in “Note 12—Business Segments and Revenue from Contracts with Customers.”
19Capital One Financial Corporation (COF)

Business Segment Financial Performance
Table 9 summarizes our business segment results, which we report based on revenue (loss) and income (loss) from continuing operations, for the third quarter and first nine months of 2021 and 2020.
Table 9: Business Segment Results
 Three Months Ended September 30,
 20212020
 
Total Net
Revenue (Loss)
(1)
Net Income
(Loss)(2)
Total Net
Revenue
(1)
Net Income
(Loss)(2)
(Dollars in millions)Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
Credit Card$4,883 63 %$2,030 65 %$4,305 58 %$1,414 59 %
Consumer Banking2,286 29 909 29 2,011 27 796 33 
Commercial Banking(3)
884 11 365 12 754 10 309 13 
Other(3)
(223)(3)(200)(6)311 (113)(5)
Total$7,830 100 %$3,104 100 %$7,381 100 %$2,406 100 %
Nine Months Ended September 30,
 20212020
 
Total Net
Revenue (Loss)
(1)
Net Income
(Loss)(2)
Total Net
Revenue
(1)
Net Income
(Loss)(2)
(Dollars in millions)Amount% of
Total
Amount% of
Total
Amount% of
Total
Amount% of
Total
Credit Card$13,754 61 %$6,305 63 %$13,132 62 %$(110)(74)%
Consumer Banking6,702 30 2,902 29 5,556 26 630 423 
Commercial Banking(3)
2,361 11 1,177 12 2,181 10 (220)(148)
Other(3)
(500)(2)(416)(4)317 (151)(101)
Total$22,317 100 %$9,968 100 %$21,186 100 %$149 100 %
__________
(1)Total net revenue (loss) consists of net interest income and non-interest income.
(2)Net income (loss) for our business segments and the Other category is based on income (loss) from continuing operations, net of tax.
(3)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
20Capital One Financial Corporation (COF)

Credit Card Business
The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.
Our Credit Card business generated net income from continuing operations of $2.0 billion and $6.3 billion in the third quarter and first nine months of 2021, respectively, compared to net income of $1.4 billion in the third quarter of 2020 and net loss of $110 million in the first nine months of 2020.
Table 10 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated.
Table 10: Credit Card Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20212020Change20212020Change
Selected income statement data:
Net interest income$3,620 $3,292 10 %$10,209 $10,363 (1)%
Non-interest income1,263 1,013 25 3,545 2,769 28 
Total net revenue(1)
4,883 4,305 13 13,754 13,132 
Provision (benefit) for credit losses(198)450 **(1,325)7,096 **
Non-interest expense2,424 2,003 21 6,822 6,180 10 
Income (loss) from continuing operations before income taxes2,657 1,852 43 8,257 (144)**
Income tax provision (benefit)627 438 43 1,952 (34)**
Income (loss) from continuing operations, net of tax$2,030 $1,414 44 $6,305 $(110)**
Selected performance metrics:
Average loans held for investment$102,046 $105,367 (3)$100,757 $112,272 (10)
Average yield on loans(2)
14.88 %13.83 %105 bps14.47 %14.03 %44 bps
Total net revenue margin(3)
18.33 16.34 199 17.70 15.59 211 
Net charge-offs$366 $943 (61)%$1,570 $3,590 (56)%
Net charge-off rate1.43 %3.58 %(215)bps2.08 %4.26 %(218)bps
Purchase volume$136,614 $107,102 28 %$377,623 $297,171 27 %
(Dollars in millions, except as noted)September 30, 2021December 31, 2020Change
Selected period-end data:
Loans held for investment$105,030 $106,956 (2)%
30+ day performing delinquency rate2.00 %2.44 %(44)bps
30+ day delinquency rate2.00 2.45 (45)
Nonperforming loan rate(4)
0.01 0.02 (1)
Allowance for credit losses$8,306 $11,191 (26)%
Allowance coverage ratio7.91 %10.46 %(255)bps
__________
(1)We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off uncollectible amounts. Total net revenue was reduced by $123 million and $478 million in the third quarter and first nine months of 2021, respectively, compared to $235 million and $942 million in the third quarter and first nine months of 2020, respectively, for credit card finance charges and fees charged off as uncollectible.
(2)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(3)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.
(4)Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “MD&A—Nonperforming Loans and Other Nonperforming Assets” for additional information.
**    Not meaningful.
21Capital One Financial Corporation (COF)

Key factors affecting the results of our Credit Card business for the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020, and changes in financial condition and credit performance between September 30, 2021 and December 31, 2020 include the following:
Net Interest Income: Net interest income increased by $328 million to $3.6 billion in the third quarter of 2021 primarily driven by higher margins and higher average loan balances. Net interest income decreased by $154 million to $10.2 billion in the first nine months of 2021 primarily driven by lower average loan balances.
Non-Interest Income: Non-interest income increased by $250 million to $1.3 billion in the third quarter of 2021 and increased by $776 million to $3.5 billion in the first nine months of 2021 primarily driven by higher net interchange fees due to an increase in purchase volume.
Provision for Credit Losses: Provision for credit losses decreased by $648 million to a benefit of $198 million in the third quarter of 2021 driven by an allowance release primarily due to strong credit performance. Provision for credit losses decreased by $8.4 billion to a benefit of $1.3 billion in the first nine months of 2021 resulting from allowance releases in 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.
Non-Interest Expense: Non-interest expense increased by $421 million to $2.4 billion in the third quarter of 2021 and increased by $642 million to $6.8 billion in the first nine months of 2021 primarily driven by increased marketing spend.
Loans Held for Investment:
Period-end loans held for investment decreased by $1.9 billion to $105.0 billion as of September 30, 2021 from December 31, 2020 primarily due to higher customer payments and the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021, partially offset by higher purchase volume.
Average loans held for investment decreased by $3.3 billion to $102.0 billion in the third quarter of 2021 compared to the third quarter of 2020 and decreased by $11.5 billion to $100.8 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily due to higher customer payments and the transfer of a $2.6 billion international card partnership portfolio to held for sale in the second quarter of 2021, partially offset by higher purchase volume.
Net Charge-Off and Delinquency Metrics: The net charge-off rate decreased by 215 basis points to 1.43% in the third quarter of 2021 compared to the third quarter of 2020 and decreased by 218 basis points to 2.08% in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by strong credit performance.
The 30+ day delinquency rate decreased by 45 basis points to 2.00% as of September 30, 2021 from December 31, 2020 driven by strong credit performance.
22Capital One Financial Corporation (COF)

Domestic Card Business
The Domestic Card business generated net income from continuing operations of $1.9 billion and $6.0 billion in the third quarter and first nine months of 2021, respectively, compared to net income of $1.3 billion in the third quarter of 2020 and net loss of $192 million in the first nine months of 2020. In the third quarter and first nine months of 2021 and 2020, the Domestic Card business accounted for greater than 90% of total net revenue of our Credit Card business.
Table 10.1 summarizes the financial results for Domestic Card business and displays selected key metrics for the periods indicated.
Table 10.1: Domestic Card Business Results
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20212020Change20212020Change
Selected income statement data:
Net interest income$3,319 $2,995 11 %$9,358 $9,470 (1)%
Non-interest income1,200 952 26 3,342 2,589 29 
Total net revenue(1)
4,519 3,947 14 12,700 12,059 
Provision (benefit) for credit losses(200)378 **(1,252)6,748 **
Non-interest expense2,191 1,802 22 6,148 5,562 11 
Income (loss) from continuing operations before income taxes2,528 1,767 43 7,804 (251)**
Income tax provision (benefit)597 419 42 1,842 (59)**
Income (loss) from continuing operations, net of tax$1,931 $1,348 43 $5,962 $(192)**
Selected performance metrics:
Average loans held for investment$96,309 $97,306 (1)$93,493 $103,980 (10)
Average yield on loans(2)
14.80 %13.57 %123 bps14.36 %13.82 %54 bps
Total net revenue margin(3)
18.40 16.22 218 17.74 15.46 228 
Net charge-offs$327 $885 (63)%$1,436 $3,359 (57)%
Net charge-off rate1.36 %3.64 %(228)bps2.05 %4.31 %(226)bps
Purchase volume$126,057 $98,107 28 %$348,472 $273,215 28 %
(Dollars in millions, except as noted)September 30, 2021December 31, 2020Change
Selected period-end data:
Loans held for investment$99,258 $98,504 %
30+ day performing delinquency rate1.93 %2.42 %(49)bps
Allowance for credit losses$7,968 $10,650 (25)%
Allowance coverage ratio8.03 %10.81 %(278)bps
__________
(1)We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue.
(2)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(3)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.
**    Not meaningful.
23Capital One Financial Corporation (COF)

Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business increased in the third quarter of 2021 and in the first nine months of 2021 compared to the third quarter of 2020 and the first nine months of 2020 primarily driven by:
Lower provision for credit losses in the third quarter and first nine months of 2021 resulting from allowance releases in 2021 due to continued strong credit performance and an improved economic outlook, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.
Higher net interest income in the third quarter of 2021 primarily driven by higher margins and higher average loan balances.
Higher non-interest income in the third quarter and first nine months of 2021 primarily due to higher net interchange fees from an increase in purchase volume.
These drivers were partially offset by:
Higher non-interest expense in the third quarter and first nine months of 2021 primarily driven by increased marketing spend.
Lower net interest income in the first nine months of 2021 driven by lower average loan balances.


24Capital One Financial Corporation (COF)

Consumer Banking Business
The primary sources of revenue for our Consumer Banking business are net interest income from loans and deposits as well as service charges and customer-related fees. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.
Our Consumer Banking business generated net income from continuing operations of $909 million and $2.9 billion in the third quarter and first nine months of 2021, respectively, and $796 million and $630 million in the third quarter and first nine months of 2020, respectively.
Table 11 summarizes the financial results of our Consumer Banking business and displays selected key metrics for the periods indicated.
Table 11: Consumer Banking Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20212020Change20212020Change
Selected income statement data:
Net interest income$2,159 $1,904 13 %$6,290 $5,226 20 %
Non-interest income127 107 19 412 330 25 
Total net revenue2,286 2,011 14 6,702 5,556 21 
Provision (benefit) for credit losses(91)(43)112 (523)1,693 **
Non-interest expense1,186 1,011 17 3,426 3,038 13 
Income from continuing operations before income taxes1,191 1,043 14 3,799 825 **
Income tax provision282 247 14 897 195 **
Income from continuing operations, net of tax$909 $796 14 $2,902 $630 **
Selected performance metrics:
Average loans held for investment:
Auto$73,296 $64,476 14 $69,700 $62,434 12 
Retail banking2,700 3,346 (19)2,969 3,023 (2)
Total consumer banking$75,996 $67,822 12 $72,669 $65,457 11 
Average yield on loans held for investment(1)
7.78 %8.36 %(58)bps7.97 %8.41 %(44)bps
Average deposits$251,307 $248,418 %$251,105 $231,988 %
Average deposits interest rate0.30 %0.66 %(36)bps0.32 %0.86 %(54)bps
Net charge-offs$51 $48 %$131 $486 (73)%
Net charge-off rate0.27 %0.28 %(1)bps0.24 %0.99 %(75)bps
Auto loan originations$11,570 $8,979 29 %$33,362 $24,910 34 %
(Dollars in millions, except as noted)September 30, 2021December 31, 2020Change
Selected period-end data:
Loans held for investment:
Auto$74,716 $65,762 14 %
Retail banking2,396 3,126 (23)
Total consumer banking$77,112 $68,888 12 
30+ day performing delinquency rate3.58 %4.62 %(104)bps
30+ day delinquency rate3.88 5.00 (112)
Nonperforming loan rate0.42 0.47 (5)
Nonperforming asset rate(2)
0.47 0.54 (7)
Allowance for credit losses$2,061 $2,715 (24)%
Allowance coverage ratio2.67 %3.94 %(127)bps
Deposits$252,387$249,815%
25Capital One Financial Corporation (COF)

__________
(1)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(2)Nonperforming assets primarily consist of nonperforming loans and repossessed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and repossessed assets.
**    Not meaningful.
Key factors affecting the results of our Consumer Banking business for the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020, and changes in financial condition and credit performance between September 30, 2021 and December 31, 2020 include the following:
Net Interest Income: Net interest income increased by $255 million to $2.2 billion in the third quarter of 2021 and increased by $1.1 billion to $6.3 billion in the first nine months of 2021 primarily driven by higher margins and deposits in our Retail Banking business as well as growth in our auto loan portfolio.
Non-Interest Income: Non-interest income remained substantially flat at $127 million in the third quarter of 2021. Non-interest income increased by $82 million to $412 million in the first nine months of 2021 primarily driven by growth in our auto loan portfolio and higher interchange fees from an increase in debit card purchase volume.
Provision for Credit Losses: Provision for credit losses decreased by $48 million to a benefit of $91 million in the third quarter of 2021 driven by an allowance release primarily due to strong credit performance in our auto loan portfolio. Provision for credit losses decreased by $2.2 billion to a benefit of $523 million in the first nine months of 2021 resulting from allowance releases in 2021 due to continued strong credit performance, an improved economic outlook and auction price favorability, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic.
Non-Interest Expense: Non-interest expense increased by $175 million to $1.2 billion in the third quarter of 2021 and increased by $388 million to $3.4 billion in the first nine months of 2021 primarily driven by increased marketing spend, growth in our auto loan portfolio, as well as continued investment in infrastructure and technology.
Loans Held for Investment: 
Period-end loans held for investment increased by $8.2 billion to $77.1 billion as of September 30, 2021 from December 31, 2020 primarily driven by growth in our auto loan portfolio due to higher originations.
Average loans held for investment increased by $8.2 billion to $76.0 billion in the third quarter of 2021 compared to the third quarter of 2020 and increased by $7.2 billion to $72.7 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by growth in our auto loan portfolio due to higher originations.
Deposits: Period-end deposits increased by $2.6 billion to $252.4 billion as of September 30, 2021 from December 31, 2020 primarily driven by increased consumer savings.
Net Charge-Off and Delinquency Metrics: The net charge-off rate remained substantially flat at 0.27% in the third quarter of 2021 compared to the third quarter of 2020 and decreased by 75 basis points to 0.24% in the first nine months of 2021 compared to the first nine months of 2020 primarily driven by strong credit performance in our auto loan portfolio, including the impact of elevated auction prices.
The 30+ day delinquency rate decreased by 112 basis points to 3.88% as of September 30, 2021 from December 31, 2020 driven by lower delinquency inventories due to strong credit performance and growth in our auto loan portfolio.
26Capital One Financial Corporation (COF)

Commercial Banking Business
The primary sources of revenue for our Commercial Banking business are net interest income from loans and deposits and non-interest income earned from products and services provided to our clients such as capital markets and treasury management. Because our Commercial Banking business has loans and investments that generate tax-exempt income, tax credits or other tax benefits, we present the revenues on a taxable-equivalent basis. Expenses primarily consist of the provision for credit losses and operating costs.
Our Commercial Banking business generated net income from continuing operations of $365 million and $1.2 billion in the third quarter and first nine months of 2021, respectively, compared to net income of $309 million in the third quarter of 2020 and net loss of $220 million in the first nine months of 2020.
Table 12 summarizes the financial results of our Commercial Banking business and displays selected key metrics for the periods indicated.
Table 12: Commercial Banking Business Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions, except as noted)20212020Change20212020Change
Selected income statement data:
Net interest income$578 $517 12 %$1,558 $1,526 %
Non-interest income306 237 29 803 655 23 
Total net revenue(1)
884 754 17 2,361 2,181 
Provision (benefit) for credit losses(2)
(53)(74)(28)(475)1,209 **
Non-interest expense459 424 1,295 1,261 
Income (loss) from continuing operations before income taxes478 404 18 1,541 (289)**
Income tax provision (benefit)113 95 19 364 (69)**
Income (loss) from continuing operations, net of tax$365 $309 18 $1,177 $(220)**
Selected performance metrics:
Average loans held for investment:
Commercial and multifamily real estate$30,314 $30,918 (2)$30,100 $31,239 (4)
Commercial and industrial44,745 45,404 (1)44,341 46,264 (4)
Total commercial banking$75,059 $76,322 (2)$74,441 $77,503 (4)
Average yield on loans held for investment(1)(3)
2.77 %2.82 %(5)bps2.75 %3.23 %(48)bps
Average deposits$42,729 $36,278 18 %$41,725 $34,391 21 %
Average deposits interest rate0.15 %0.25 %(10)bps0.15 %0.47 %(32)bps
Net charge-offs$9 $82 (89)%$6 $293 (98)%
Net charge-off rate0.05 %0.43 %(38)bps0.01 %0.50 %(49)bps
(Dollars in millions, except as noted)September 30, 2021December 31, 2020Change
Selected period-end data:
Loans held for investment:
Commercial and multifamily real estate$33,096 $30,681 %
Commercial and industrial46,152 45,099 
Total commercial banking$79,248 $75,780 
Nonperforming loan rate0.76 %0.86 %(10)bps
Nonperforming asset rate(4)
0.76 0.86 (10)
Allowance for credit losses(2)
$1,206 $1,658 (27)%
Allowance coverage ratio1.52 %2.19 %(67)bps
Deposits$43,347$39,590 %
Loans serviced for others47,39344,162 
27Capital One Financial Corporation (COF)

__________
(1)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
(2)The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve is included in other liabilities on our consolidated balance sheets. Our reserve for unfunded lending commitments totaled $166 million and $195 million as of September 30, 2021 and December 31, 2020, respectively.
(3)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(4)Nonperforming assets consist of nonperforming loans and other foreclosed assets. The total nonperforming asset rate is calculated based on total nonperforming assets divided by the combined period-end total loans held for investment and other foreclosed assets.
**    Not meaningful.
Key factors affecting the results of our Commercial Banking business for the third quarter and first nine months of 2021 compared to the third quarter and first nine months of 2020, and changes in financial condition and credit performance between September 30, 2021 and December 31, 2020 include the following:
Net Interest Income: Net interest income increased by $61 million to $578 million in the third quarter of 2021 primarily driven by higher margins. Net interest income increased by $32 million to $1.6 billion in the first nine months of 2021 primarily driven by higher average deposit balances, partially offset by a one-time charge for unwinding the internal funding related to moving $1.5 billion in loans to held for sale in the second quarter of 2021.
Non-Interest Income: Non-interest income increased by $69 million to $306 million in the third quarter of 2021 and increased by $148 million to $803 million in the first nine months of 2021 driven by higher activity in our capital markets business.
Provision for Credit Losses: Provision for credit losses was a benefit of $53 million in the third quarter of 2021 resulting from an improvement in our energy loan portfolio, compared to a benefit of $74 million in the third quarter of 2020 driven by an allowance release primarily due to lower loan balances. Provision for credit losses decreased by $1.7 billion to a benefit of $475 million in the first nine months of 2021 resulting from allowance releases due to an improved economic outlook and improvement in our energy loan portfolio, compared to allowance builds in 2020 driven by expectations of economic worsening at the start of the COVID-19 pandemic as well as credit deterioration in our energy loan portfolio.
Non-Interest Expense: Non-interest expense increased by $35 million to $459 million in the third quarter of 2021 and increased by $34 million to $1.3 billion in the first nine months of 2021 primarily driven by continued investment in infrastructure and technology.
Loans Held for Investment:
Period-end loans held for investment increased by $3.5 billion to $79.2 billion as of September 30, 2021 from December 31, 2020 driven by growth across our commercial loan portfolio.
Average loans held for investment decreased by $1.3 billion to $75.1 billion in the third quarter of 2021 compared to the third quarter of 2020 and decreased by $3.1 billion to $74.4 billion in the first nine months of 2021 compared to the first nine months of 2020 driven by higher utilization of credit lines in 2020 due to the COVID-19 pandemic.
Deposits: Period-end deposits increased by $3.8 billion to $43.3 billion as of September 30, 2021 from December 31, 2020 primarily driven by elevated client liquidity.
Net Charge-Off and Nonperforming Metrics: The net charge-off rate decreased by 38 basis points to 0.05% in the third quarter of 2021 driven by lower net charge-offs in our energy and real estate loan portfolios. The net charge-off rate decreased by 49 basis points to 0.01% in the first nine months of 2021 primarily driven by lower net charge-offs in our energy loan portfolio.
The nonperforming loan rate decreased by 10 basis points to 0.76% as of September 30, 2021 from December 31, 2020 driven by improvements in our energy loan portfolio, partially offset by isolated credit downgrades in our real estate portfolio.
28Capital One Financial Corporation (COF)

Other Category
Other includes unallocated amounts related to our centralized Corporate Treasury group activities, such as management of our corporate investment securities portfolio, asset/liability management and certain capital management activities. Other also includes:
unallocated corporate revenue and expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges;
offsets related to certain line-item reclassifications;
residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments; and
foreign exchange-rate fluctuations on foreign currency-denominated balances.
Table 13 summarizes the financial results of our Other category for the periods indicated.
Table 13: Other Category Results
 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)20212020Change20212020Change
Selected income statement data:
Net interest loss$(201)$(158)27 %$(336)$(75)**
Non-interest income (loss)(22)469 **(164)392 **
Total net revenue (loss)(1)
(223)311 **(500)317 **
Provision (benefit) for credit losses (2)**(2)**
Non-interest expense117 110 349 568 (39)%
Income (loss) from continuing operations before income taxes(340)203 **(847)(253)**
Income tax provision (benefit)(140)316 **(431)(102)**
Loss from continuing operations, net of tax$(200)$(113)77 $(416)$(151)175 
__________
(1)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.
**    Not meaningful.
Loss from continuing operations increased by $87 million to a loss of $200 million in the third quarter of 2021, primarily driven by the absence of a gain on our equity investment in Snowflake Inc. in the third quarter of 2020, partially offset by an increase in income tax benefit due to a change from pre-tax income in 2020 to pre-tax loss in 2021, and the relative impact of the tax credits.
Loss from continuing operations increased by $265 million to a loss of $416 million in the first nine months of 2021, primarily driven by the absence of a gain on our equity investment in Snowflake Inc. in the third quarter of 2020, and reduced funding needs of our business segments in the first nine months of 2021. These drivers were partially offset by an increase in income tax benefit due to a higher pre-tax loss and the relative impact of the tax credits, as well as lower legal reserve builds in non-interest expense.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with U.S. GAAP requires management to make a number of judgments, estimates and assumptions that affect the amount of assets, liabilities, income and expenses on the consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a summary of our significant accounting policies under “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.
29Capital One Financial Corporation (COF)

We have identified the following accounting estimates as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. Our critical accounting policies and estimates are as follows:
Loan loss reserves
Asset impairment
Fair value of financial instruments
Customer rewards reserve
We evaluate our critical accounting estimates and judgments on an ongoing basis and update them as necessary, based on changing conditions. There have been no changes to our critical accounting policies and estimates described in our December 31, 2020 Form 10-K under “MD&A—Critical Accounting Policies and Estimates.”
ACCOUNTING CHANGES AND DEVELOPMENTS
Accounting Standards Issued but Not Adopted as of September 30, 2021
There were no relevant new accounting standards issued but not adopted as of September 30, 2021. See “Note 1—Summary of Significant Accounting Policies” for information on the accounting standards we adopted in 2021.
CAPITAL MANAGEMENT
The level and composition of our capital are determined by multiple factors, including our consolidated regulatory capital requirements as described in more detail below and internal risk-based capital assessments such as internal stress testing and economic capital. The level and composition of our capital may also be influenced by rating agency guidelines, subsidiary capital requirements, business environment, conditions in the financial markets and assessments of potential future losses due to adverse changes in our business and market environments.
Capital Standards and Prompt Corrective Action
The Company and the Banks are subject to the Basel III Capital Rules established by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Office of the Comptroller of the Currency (“OCC”) respectively (the “Basel III Capital Rules”). The Basel III Capital Rules implement certain capital requirements published by the Basel Committee on Banking Supervision (“Basel Committee”), along with certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and other capital provisions.
Following the tailoring of the Basel III Capital Rules, the Company, as a bank holding company (“BHC”) with total consolidated assets of at least $250 billion but less than $700 billion and not exceeding any of the applicable risk-based thresholds, is a Category III institution.
The Banks, as subsidiaries of a Category III institution, are Category III banks. Moreover, the Banks, as insured depository institutions, are subject to prompt corrective action (“PCA”) capital regulations.
Basel III and United States Capital Rules
Under the Basel III Capital Rules, we must maintain a minimum common equity Tier 1 (“CET1”) capital ratio of 4.5%, a Tier 1 capital ratio of 6.0%, and a total capital ratio of 8.0%, in each case in relation to risk-weighted assets. In addition, we must maintain a minimum leverage ratio of 4.0% and a minimum supplementary leverage ratio of 3.0%. We are also subject to the capital conservation buffer and countercyclical capital buffer requirements, as described below.
As a Category III institution, effective January 1, 2020, we are no longer subject to the Basel III Advanced Approaches framework and certain associated capital requirements, and we have elected to exclude certain elements of accumulated other comprehensive income (“AOCI”) from our regulatory capital as permitted for a Category III institution. We remain subject to
30Capital One Financial Corporation (COF)

the countercyclical capital buffer requirement (which is currently set at 0%) and supplementary leverage ratio requirement of 3.0%.
Global systemically important banks (“G-SIBs”) that are based in the U.S. are subject to an additional CET1 capital requirement known as the G-SIB Surcharge. We are not a G-SIB based on the most recent available data and thus we are not subject to a G-SIB Surcharge.
Stress Capital Buffer Rule
The Basel III Capital Rules require banking institutions to maintain a capital conservation buffer, composed of CET1 capital, above the regulatory minimum ratios. The capital conservation buffer for BHCs was previously fixed at 2.5%. In March 2020, the Federal Reserve issued a final rule to implement the stress capital buffer requirement (the “Stress Capital Buffer Rule”). The stress capital buffer requirement is institution-specific and replaces the fixed 2.5% capital conservation buffer for BHCs.
Pursuant to the Stress Capital Buffer Rule, the Federal Reserve uses the results of its supervisory stress test to determine the size of a BHC’s stress capital buffer requirement. In particular, a BHC’s stress capital buffer requirement equals, subject to a floor of 2.5%, the sum of (i) the difference between the BHC’s starting CET1 capital ratio and its lowest projected CET1 capital ratio under the severely adverse scenario of the Federal Reserve’s supervisory stress test plus (ii) the ratio of the BHC’s projected four quarters of common stock dividends (for the fourth to seventh quarters of the planning horizon) to the projected risk-weighted assets for the quarter in which the BHC’s projected CET1 capital ratio reaches its minimum under the supervisory stress test.
Under the Stress Capital Buffer Rule framework, the Company’s “standardized approach capital conservation buffer” includes its stress capital buffer requirement (which will be recalibrated every year based on the Company’s supervisory stress test results), any G-SIB surcharge (which is not applicable to us) and the countercyclical capital buffer requirement (which is currently set at 0%). Any determination to increase the countercyclical capital buffer generally would be effective twelve months after the announcement of such an increase, unless the Federal Reserve, OCC and Federal Deposit Insurance Corporation (the “FDIC”), hereafter collectively referred to as the “Federal Banking Agencies”, set an earlier effective date.
Based on the Company’s 2020 supervisory stress testing results, the Company’s stress capital buffer requirement was 5.6% for the period from October 1, 2020 through September 30, 2021. Therefore, the Company’s minimum capital requirements plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework were 10.1%, 11.6% and 13.6%, respectively, for the period from October 1, 2020 through September 30, 2021.
Based on the Company’s 2021 supervisory stress testing results, the Company’s stress capital buffer requirement for the period beginning on October 1, 2021 through September 30, 2022 is 2.5%. Therefore, the Company’s minimum capital requirements plus the standardized approach capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios under the stress capital buffer framework are 7.0%, 8.5% and 10.5%, respectively, for the period from October 1, 2021 through September 30, 2022.
The Stress Capital Buffer Rule does not apply to the Banks. The capital conservation buffer for the Banks continues to be fixed at 2.5%. Accordingly, each Bank’s minimum capital requirements plus its capital conservation buffer for CET1 capital, Tier 1 capital and total capital ratios are 7.0%, 8.5% and 10.5% respectively.
If we fail to maintain our capital ratios above the minimum capital requirements plus the applicable buffer requirements, we will face increasingly strict automatic limitations on capital distributions and discretionary bonus payments to certain executive officers.
As of September 30, 2021 and December 31, 2020, respectively, each of the Company and the Banks exceeded the minimum capital requirements and the buffer requirements applicable to them, and each of the Banks was “well capitalized” under PCA requirements.
Market Risk Rule
The “Market Risk Rule” supplements the Basel III Capital Rules by requiring institutions subject to the rule to adjust their risk-based capital ratios to reflect the market risk in their trading book. The Market Risk Rule generally applies to institutions with aggregate trading assets and liabilities equal to 10% or more of total assets or $1 billion or more. As of September 30, 2021, the
31Capital One Financial Corporation (COF)

Company and CONA are subject to the Market Risk Rule. See “MD&A—Market Risk Profile” below for additional information.
CECL Transition Rule
The Federal Banking Agencies adopted a final rule (the “2020 CECL Transition Rule”) that provides banking institutions an optional five-year transition period to phase in the impact of the current expected credit loss (“CECL”) standard on their regulatory capital (the “2020 CECL Transition Election”).
Pursuant to the 2020 CECL Transition Rule, a banking institution may elect to delay the estimated impact of adopting CECL on its regulatory capital through December 31, 2021 and then phase in the estimated cumulative impact from January 1, 2022 through December 31, 2024. For the “day 2” ongoing impact of CECL during the initial two years, the Federal Banking Agencies use a uniform “scaling factor” of 25% as an approximation of the increase in the allowance under the CECL standard compared to the prior incurred loss methodology. Accordingly, from January 1, 2020 through December 31, 2021, electing banking institutions are permitted to add back to their regulatory capital an amount equal to the sum of the after-tax “day 1” CECL adoption impact and 25% of the increase in the allowance since the adoption of the CECL standard. Beginning January 1, 2022 through December 31, 2024, the after-tax “day 1” CECL adoption impact and the cumulative “day 2” ongoing impact will be phased in to regulatory capital at 25% per year. The following table summarizes the capital impact delay and phase in period on our regulatory capital from years 2020 to 2025.
Capital Impact DelayedPhase In Period
202020212022202320242025
“Day 1” CECL adoption impactCapital impact delayed to 202225% Phased In50% Phased In75% Phased InFully Phased In
Cumulative “day 2” ongoing impact 25% scaling factor as an approximation of the increase in allowance under CECL
We adopted the CECL standard (for accounting purposes) as of January 1, 2020, and made the 2020 CECL Transition Election (for regulatory capital purposes) in the first quarter of 2020. Therefore, the applicable amounts presented in this Report reflect such election.
For the description of the regulatory capital rules we are subject to, see “MD&A—Supervision and Regulation” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K.
32Capital One Financial Corporation (COF)

Table 14 provides a comparison of our regulatory capital ratios under the Basel III Standardized Approach, the regulatory minimum capital adequacy ratios and the PCA well-capitalized level for each ratio, where applicable, as of September 30, 2021 and December 31, 2020.
Table 14: Capital Ratios Under Basel III(1)(2)
 September 30, 2021December 31, 2020
RatioMinimum
Capital
Adequacy
Well-
Capitalized
RatioMinimum
Capital
Adequacy
Well-
Capitalized
Capital One Financial Corp:
Common equity Tier 1 capital(3)
13.8 %4.5 %N/A13.7 %4.5 %N/A
Tier 1 capital(4)
15.7 6.0 6.0 %15.3 6.0 6.0 %
Total capital(5)
18.2 8.0 10.0 17.7 8.0 10.0 
Tier 1 leverage(6)
12.2 4.0 N/A11.2 4.0 N/A
Supplementary leverage(7)(8)
10.4 3.0 N/A10.7 3.0 N/A
COBNA:
Common equity Tier 1 capital(3)
18.3 4.5 6.5 21.5 4.5 6.5 
Tier 1 capital(4)
18.3 6.0 8.0 21.5 6.0 8.0 
Total capital(5)
19.9 8.0 10.0 23.4 8.0 10.0 
Tier 1 leverage(6)
16.1 4.0 5.0 18.3 4.0 5.0 
Supplementary leverage(7)
12.9 3.0 N/A14.7 3.0 N/A
CONA:
Common equity Tier 1 capital(3)
11.7 4.5 6.5 12.4 4.5 6.5 
Tier 1 capital(4)
11.7 6.0 8.0 12.4 6.0 8.0 
Total capital(5)
12.9 8.0 10.0 13.7 8.0 10.0 
Tier 1 leverage(6)
7.6 4.0 5.0 7.6 4.0 5.0 
Supplementary leverage(7)
6.8 3.0 N/A6.9 3.0 N/A
__________
(1)Capital requirements that are not applicable are denoted by “N/A.”
(2)Ratios as of September 30, 2021 are preliminary. As we continue to validate our data, the calculations are subject to change until we file our September 30, 2021 Form FR Y-9C—Consolidated Financial Statements for Holding Companies and Call Reports.
(3)Common equity Tier 1 capital ratio is a regulatory capital measure calculated based on common equity Tier 1 capital divided by risk-weighted assets.
(4)Tier 1 capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.
(5)Total capital ratio is a regulatory capital measure calculated based on total capital divided by risk-weighted assets.
(6)Tier 1 leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by adjusted average assets.
(7)Supplementary leverage ratio is a regulatory capital measure calculated based on Tier 1 capital divided by total leverage exposure.
(8)The Company’s supplementary leverage ratio as of December 31, 2020 reflected the temporary exclusions of U.S Treasury securities and deposits at Federal Reserve Banks from the denominator of the supplementary leverage ratio. See “Part I—Item 1. Business—Supervision and Regulation—Capital and Liquidity Regulation” in our 2020 Form 10-K for additional details.
33Capital One Financial Corporation (COF)

Table 15 presents regulatory capital under the Basel III Standardized Approach and regulatory capital metrics as of September 30, 2021 and December 31, 2020.
Table 15: Regulatory Risk-Based Capital Components and Regulatory Capital Metrics
(Dollars in millions)September 30, 2021December 31, 2020
Regulatory Capital Under Basel III Standardized Approach
Common equity excluding AOCI$58,705 $55,299 
Adjustments:
AOCI, net of tax(1)
(33)(29)
Goodwill, net of related deferred tax liabilities(14,435)(14,448)
Intangible assets, net of related deferred tax liabilities(84)(86)
Other(2)
(15)— 
Common equity Tier 1 capital44,138 40,736 
Tier 1 capital instruments5,911 4,847 
Tier 1 capital50,049 45,583 
Tier 2 capital instruments3,762 3,385 
Qualifying allowance for credit losses4,040 3,820 
Tier 2 capital7,802 7,205 
Total capital$57,851 $52,788 
Regulatory Capital Metrics
Risk-weighted assets$318,729 $297,903 
Adjusted average assets411,216 406,762 
Total leverage exposure480,232 427,522 
__________
(1)Excludes certain components of AOCI as permitted under the Tailoring Rules.
(2)Includes deferred tax assets deducted from regulatory capital.
Capital Planning and Regulatory Stress Testing
On June 24, 2021, the Federal Reserve released the results of its supervisory stress tests for the 2021 cycle. Based on the results, all participating BHCs, including the Company, remained above their risk-based minimum capital requirements in the hypothetical stress scenario. Accordingly, as laid out previously by the Federal Reserve, the temporary capital distribution restrictions put in place in the third quarter of 2020 following the outbreak of COVID-19 ended for all participating BHCs, including the Company, after the second quarter of 2021. All participating BHCs, including the Company, remain subject to the normal capital distribution restrictions of the stress capital buffer framework.
On January 25, 2021, our Board of Directors authorized the repurchase of up to $7.5 billion of shares of our common stock. We repurchased approximately $2.7 billion of shares of our common stock during the third quarter of 2021 and $4.9 billion during the first nine months of 2021. On July 28, 2021, our Board of Directors authorized a special dividend of $0.60 per share of common stock payable in the third quarter of 2021. In addition to the special dividend, the Board of Directors authorized an increase to our quarterly common stock dividend from $0.40 per share to $0.60 per share beginning with our dividend payable in the third quarter of 2021.
For the description of the regulatory capital planning rules we are subject to, see “MD&A—Supervision and Regulation” in this Report as well as “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K.
34Capital One Financial Corporation (COF)

Equity Offerings and Transactions
On May 4, 2021, we issued 27,000,000 depositary shares, each representing a 1/40th interest in a share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series L, $0.01 par value, with a liquidation preference of $25 per depositary share (“Series L Preferred Stock”). The net proceeds of the offering of Series L Preferred Stock were approximately $653 million after deducting underwriting commissions and offering expenses. Dividends on the Series L Preferred Stock are payable quarterly in arrears at a rate of 4.375% per annum.
On June 10, 2021, we issued 1,000,000 shares of Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series M, $0.01 par value, with a liquidation preference of $1,000 per share (the “Series M Preferred Stock”). The net proceeds of the offering of Series M Preferred Stock were approximately $988 million, after deducting underwriting commissions and offering expenses. Dividends on the Series M Preferred Stock are payable quarterly in arrears at a rate of 3.950% per annum through August 31, 2026. Effective September 1, 2026, and at every subsequent five-year anniversary, the dividend rate resets to the 5-Year Treasury Rate plus 3.157% per annum.
On July 29, 2021, we issued 17,000,000 depositary shares, each representing a 1/40th interest in a share of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series N, $0.01 par value, with a liquidation preference of $25 per depositary share (“Series N Preferred Stock”). The net proceeds of the offering of Series N Preferred Stock were approximately $412 million after deducting underwriting commissions and offering expenses. Dividends on the Series N Preferred Stock are payable quarterly in arrears at a rate of 4.25% per annum.
On September 1, 2021, we redeemed all outstanding shares of our Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series E for $1.0 billion. The redemption reduced our net income available to common shareholders by $12 million in the third quarter of 2021 as we recognized the previously deferred issuance costs associated with this series.
On October 18, 2021, we announced that we will redeem all outstanding shares of our Fixed Rate 5.20% Non-Cumulative Perpetual Preferred Stock, Series G, and our Fixed Rate 6.00% Non-Cumulative Perpetual Preferred Stock, Series H, on December 1, 2021 for an aggregate redemption price of $1.1 billion. We expect these redemptions will reduce our net income available to common shareholders by approximately $34 million in the fourth quarter of 2021 as we recognize the previously deferred issuance costs associated with these series. For additional information on the expected preferred stock dividends to be paid in the fourth quarter of 2021 and per quarter in 2022, see “MD&A—Executive Summary and Business Outlook—Business Outlook—Total Company Expectations” in this Report.



35Capital One Financial Corporation (COF)

Dividend Policy and Stock Purchases
In the first nine months of 2021, we declared and paid common stock dividends of $897 million, or $2.00 per share, and preferred stock dividends of $200 million. The following table summarizes the dividends paid per share on our various preferred stock series in the first nine months of 2021.
Table 16: Preferred Stock Dividends Paid Per Share
SeriesDescriptionIssuance DatePer Annum
Dividend Rate
Dividend Frequency2021
Q3Q2Q1
Series E(1)
Fixed-to-Floating Rate
Non-Cumulative
May 14, 20155.550% through 5/31/2020;
3-mo. LIBOR + 380 bps thereafter
Semi-Annually through 5/31/2020;
Quarterly thereafter
$10.06$10.20$10.06
Series G5.200%
Non-Cumulative
July 29, 20165.200%Quarterly13.0013.0013.00
Series H6.000%
Non-Cumulative
November 29, 20166.000Quarterly15.0015.0015.00
Series I5.000%
Non-Cumulative
September 11, 20195.000Quarterly12.5012.5012.50
Series J4.800%
Non-Cumulative
January 31, 20204.800Quarterly12.0012.0012.00
Series K4.625%
Non-Cumulative
September 17, 20204.625Quarterly11.5611.5611.56
Series L4.375%
Non-Cumulative
May 4, 20214.375Quarterly14.22
Series M3.950% Fixed Rate Reset
Non-Cumulative
June 10, 20213.950% through 8/31/2026; resets 9/1/2026 and every subsequent 5 year anniversary at 5-Year Treasury +3.157%Quarterly8.89
Series N4.250%
Non-Cumulative
July 29, 20214.250Quarterly
__________
(1)On September 1, 2021, we redeemed all outstanding shares of our preferred stock Series E.
The declaration and payment of dividends to our stockholders, as well as the amount thereof, are subject to the discretion of our Board of Directors and depend upon our results of operations, financial condition, capital levels, cash requirements, future prospects, regulatory requirements and other factors deemed relevant by the Board of Directors. As a BHC, our ability to pay dividends is largely dependent upon the receipt of dividends or other payments from our subsidiaries. The Banks are subject to regulatory restrictions that limit their ability to transfer funds to our BHC. As of September 30, 2021, funds available for dividend payments from COBNA and CONA were $1.1 billion and $715 million, respectively. There can be no assurance that we will declare and pay any dividends to stockholders.
On January 25, 2021, our Board of Directors authorized the repurchase of up to $7.5 billion of shares of our common stock. We repurchased approximately $2.7 billion of shares of our common stock during the third quarter of 2021 and $4.9 billion during the first nine months of 2021.
The timing and exact amount of any future common stock repurchases will depend on various factors, including regulatory approval, market conditions, opportunities for growth, our capital position and the amount of retained earnings. Our stock repurchase program does not include specific price targets, may be executed through open market purchases or privately negotiated transactions, including utilizing Rule 10b5-1 programs, and may be suspended at any time. For additional information on dividends and stock repurchases, see “MD&A—Capital Management—Capital Planning and Regulatory Stress Testing” and “Part I—Item 1. Business—Supervision and Regulation—Dividends, Stock Repurchases and Transfers of Funds” in our 2020 Form 10-K.
36Capital One Financial Corporation (COF)

RISK MANAGEMENT
Risk Management Framework
Our Risk Management Framework (the “Framework”) sets consistent expectations for risk management across the Company. It also sets expectations for our “Three Lines of Defense” model, which defines the roles, responsibilities and accountabilities for taking and managing risk across the Company. Accountability for overseeing an effective Framework resides with our Board of Directors either directly or through its committees.
The “First Line of Defense” consists of any line of business or function that is accountable for risk taking and is responsible for: (i) engaging in activities designed to generate revenue or reduce expenses; (ii) providing operational support or servicing to any business function for the delivery of products or services to customers; or (iii) providing technology services in direct support of first line business areas. Each line of business or first line function is responsible for managing the risks associated with their activities, including identifying, assessing, measuring, monitoring, controlling and reporting the risks within its business activities, consistent with the risk framework. The “Second Line of Defense” consists of two types of functions: Independent Risk Management (“IRM”) and Support Functions. IRM oversees risk-taking activities and assesses risks and issues independent from the first line of defense. Support Functions are centers of specialized expertise (e.g., Human Resources, Accounting, Legal) that provide support services to the Company. The “Third Line of Defense” is comprised of the Internal Audit and Credit Review functions. The third line provides independent and objective assurance to senior management and to the Board of Directors that the first and second lines of defense have systems and governance processes which are well-designed and working as intended, and that the Framework is appropriate for our size, complexity and risk profile.
Our Framework consists of the following nine elements:

 Governance and Accountability


Strategy and Risk Alignment


Risk Identification

Assessment, Measurement
and Response


Monitoring and Testing


Aggregation, Reporting and Escalation


Capital and Liquidity Management (including Stress Testing)


Risk Data and Enabling Technology


Culture and Talent Management

37Capital One Financial Corporation (COF)

We provide additional discussion of our risk management principles, roles and responsibilities, framework and risk appetite under “MD&A—Risk Management” in our 2020 Form 10-K.
Risk Categories
We apply our Framework to protect the Company from the major categories of risk that we are exposed to through our business activities. We have seven major categories of risk as noted below. We provide a description of these categories and how we manage them under “MD&A—Risk Management” in our 2020 Form 10-K.
Compliance risk
Credit risk
Liquidity risk
Market risk
Operational risk
Reputation risk
Strategic risk
CREDIT RISK PROFILE
Our loan portfolio accounts for the substantial majority of our credit risk exposure. Our lending activities are governed under our credit policy and are subject to independent review and approval. Below we provide information about the composition of our loan portfolio, key concentrations and credit performance metrics.
We also engage in certain non-lending activities that may give rise to ongoing credit and counterparty settlement risk, including purchasing securities for our investment securities portfolio, entering into derivative transactions to manage our market risk exposure and to accommodate customers, extending short-term advances on syndication activity including bridge financing transactions we have underwritten, depositing certain operational cash balances in other financial institutions, executing certain foreign exchange transactions and extending customer overdrafts. We provide additional information related to our investment securities portfolio under “MD&A—Consolidated Balance Sheets Analysis—Investment Securities” and credit risk related to derivative transactions in “Note 8—Derivative Instruments and Hedging Activities.”
38Capital One Financial Corporation (COF)

Portfolio Composition of Loans Held for Investment
We provide a variety of lending products. Our primary products include credit cards, auto loans and commercial lending products. For information on our lending policies and procedures, including our underwriting criteria for our primary loan products, see “MD&A—Credit Risk Profile” in our 2020 Form 10-K.
Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. The information presented in this section excludes loans held for sale, which totaled $6.3 billion and $2.7 billion as of September 30, 2021 and December 31, 2020, respectively.
Table 17 presents the composition of our portfolio of loans held for investment by portfolio segment as of September 30, 2021 and December 31, 2020.
Table 17: Portfolio Composition of Loans Held for Investment
September 30, 2021December 31, 2020
(Dollars in millions)Loans% of TotalLoans% of Total
Credit Card:
Domestic credit card$99,258 38.0 %$98,504 39.1 %
International card businesses5,772 2.2 8,452 3.4 
Total credit card105,030 40.2 106,956 42.5 
Consumer Banking:
Auto74,716 28.6 65,762 26.2 
Retail banking(1)
2,396 0.9 3,126 1.2 
Total consumer banking77,112 29.5 68,888 27.4 
Commercial Banking:(1)
Commercial and multifamily real estate33,096 12.7 30,681 12.2 
Commercial and industrial46,152 17.6 45,099 17.9 
Total commercial banking79,248 30.3 75,780 30.1 
Total loans held for investment$261,390 100.0 %$251,624 100.0 %
__________
(1)Includes Paycheck Protection Program (“PPP”) loans of $538 million and $182 million in our retail and commercial loan portfolios, respectively, as of September 30, 2021 and $919 million and $238 million as of December 31, 2020, respectively.
39Capital One Financial Corporation (COF)

Geographic Composition
We market our credit card products throughout the United States, Canada and the United Kingdom. Our credit card loan portfolio is geographically diversified due to our product and marketing approach. The table below presents the geographic profile of our credit card loan portfolio as of September 30, 2021 and December 31, 2020.
Table 18: Credit Card Portfolio by Geographic Region
September 30, 2021December 31, 2020
(Dollars in millions)Amount% of TotalAmount% of Total
Domestic credit card:
California$10,066 9.6 %$9,943 9.3 %
Texas8,278 7.9 8,090 7.6 
Florida6,989 6.7 6,910 6.5 
New York6,384 6.1 6,327 5.9 
Pennsylvania4,147 3.9 4,158 3.9 
Illinois4,103 3.9 4,149 3.9 
Ohio3,590 3.4 3,645 3.4 
New Jersey3,219 3.1 3,179 3.0 
Georgia3,099 3.0 3,046 2.8 
Michigan3,028 2.9 3,010 2.8 
Other46,355 44.0 46,047 43.0 
Total domestic credit card99,258 94.5 98,504 92.1 
International card businesses:
Canada2,947 2.8 5,728 5.4 
United Kingdom2,825 2.7 2,724 2.5 
Total international card businesses5,772 5.5 8,452 7.9 
Total credit card$105,030 100.0 %$106,956 100.0 %
40Capital One Financial Corporation (COF)

Our auto loan portfolio is geographically diversified in the United States due to our product and marketing approach. Retail banking includes small business loans and other consumer lending products originated through our branch network. The table below presents the geographic profile of our auto loan and retail banking portfolios as of September 30, 2021 and December 31, 2020.
Table 19: Consumer Banking Portfolio by Geographic Region
 September 30, 2021December 31, 2020
(Dollars in millions)Amount% of TotalAmount% of Total
Auto:
Texas$9,173 11.9 %$8,207 11.9 %
California8,896 11.5 7,573 11.0 
Florida6,354 8.2 5,544 8.1 
Georgia3,292 4.3 2,989 4.3 
Pennsylvania3,061 4.0 2,569 3.7 
Ohio3,051 4.0 2,770 4.0 
Illinois2,840 3.7 2,431 3.5 
New York2,510 3.3 2,267 3.3 
Other35,539 46.0 31,412 45.7 
Total auto74,716 96.9 65,762 95.5 
Retail banking:
New York830 1.1 1,081 1.6 
Louisiana471 0.6 634 0.9 
Texas459 0.6 576 0.8 
New Jersey170 0.2 222 0.3 
Maryland167 0.2 224 0.3 
Virginia125 0.2 179 0.3 
Other174 0.2 210 0.3 
Total retail banking2,396 3.1 3,126 4.5 
Total consumer banking$77,112 100.0 %$68,888 100.0 %
We originate commercial and multifamily real estate loans in most regions of the United States. The table below presents the geographic profile of our commercial real estate portfolio of September 30, 2021 and December 31, 2020.
Table 20: Commercial Real Estate Portfolio by Region
September 30, 2021December 31, 2020
(Dollars in millions)Amount% of TotalAmount% of Total
Geographic concentration:(1)
Northeast$15,590 47.10 %$17,290 56.35 %
South5,460 16.50 3,806 12.40 
Pacific West5,086 15.37 3,424 11.16 
Mid-Atlantic3,462 10.46 3,344 10.90 
Midwest2,351 7.10 1,993 6.50 
Mountain1,147 3.47 824 2.69 
Total$33,096 100.00 %$30,681 100.00 %
__________
(1)Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. Northeast consists of CT, MA, ME, NH, NJ, NY, PA, RI and VT. South consists of AL, AR, FL, GA, KY, LA, MS, NC, OK, SC, TN and TX. Pacific West consists of: AK, CA, HI, OR and WA. Mid-Atlantic consists of DC, DE, MD, VA and WV. Midwest consists of: IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD and WI. Mountain consists of: AZ, CO, ID, MT, NM, NV, UT and WY.
41Capital One Financial Corporation (COF)

Commercial Loans by Industry
Table 21 summarizes our commercial loans held for investment portfolio by industry classification as of September 30, 2021 and December 31, 2020. Industry classifications below are based on our interpretation of the North American Industry Classification System codes as they pertain to each individual loan.
Table 21: Commercial Loans by Industry
(Percentage of portfolio)September 30, 2021December 31, 2020
Industry Classification:
Real estate36 %39 %
Finance24 17 
Healthcare9 11 
Business services6 
Educational services4 
Public administration4 
Construction and land3 
Retail trade3 
Oil and gas2 
Other9 
Total100 %100 %
42Capital One Financial Corporation (COF)

Credit Risk Measurement
We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. Trends in delinquency rates are the key credit quality indicator for our credit card and retail banking loan portfolios as changes in delinquency rates can provide an early warning of changes in potential future credit losses. The key indicator we monitor when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they provide insight into borrower risk profiles, which give indications of potential future credit losses. The key credit quality indicator for our commercial loan portfolios is our internal risk ratings as we generally classify loans that have been delinquent for an extended period of time and other loans with significant risk of loss as nonperforming. In addition to these credit quality indicators, we also manage and monitor other credit quality metrics such as level of nonperforming loans and net charge-off rates.
We underwrite most consumer loans using proprietary models, which typically include credit bureau data, such as borrower credit scores, application information and, where applicable, collateral and deal structure data. We continuously adjust our management of credit lines and collection strategies based on customer behavior and risk profile changes. We also use borrower credit scores for subprime classification, for competitive benchmarking and, in some cases, to drive product segmentation decisions. 
Table 22 provides details on the credit scores of our domestic credit card and auto loan portfolios as of September 30, 2021 and December 31, 2020.
Table 22: Credit Score Distribution
(Percentage of portfolio)September 30, 2021December 31, 2020
Domestic credit card—Refreshed FICO scores:(1)
Greater than 66071 %69 %
660 or below29 31 
Total100 %100 %
AutoAt origination FICO scores:(2)
Greater than 66049 %46 %
621 - 66020 20 
620 or below31 34 
Total100 %100 %
__________
(1)Percentages represent period-end loans held for investment in each credit score category. Domestic card credit scores generally represent FICO scores. These scores are obtained from one of the major credit bureaus at origination and are refreshed monthly thereafter. We approximate non-FICO credit scores to comparable FICO scores for consistency purposes. Balances for which no credit score is available or the credit score is invalid are included in the 660 or below category.
(2)Percentages represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit score is invalid are included in the 620 or below category.
We present information in the section below on the credit performance of our loan portfolio, including the key metrics we use in tracking changes in the credit quality of our loan portfolio. See “Note 3—Loans” for additional credit quality information and see “Note 1—Summary of Significant Accounting Policies” for information on our accounting policies for delinquent and nonperforming loans, charge-offs and troubled debt restructurings (“TDRs”) for each of our loan categories.
Delinquency Rates
We consider the entire balance of an account to be delinquent if the minimum required payment is not received by the customer’s due date, measured at each balance sheet date. Our 30+ day delinquency metrics include all loans held for investment that are 30 or more days past due, whereas our 30+ day performing delinquency metrics include all loans held for investment that are 30 or more days past due but are currently classified as performing and accruing interest. The 30+ day delinquency and 30+ day performing delinquency metrics are the same for domestic credit card loans, as we continue to classify these loans as performing until the account is charged off, typically when the account is 180 days past due. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories. We provide additional information on our credit quality metrics in “MD&A—Business Segment Financial Performance.”
43Capital One Financial Corporation (COF)

Table 23 presents our 30+ day performing delinquency rates and 30+ day delinquency rates of our portfolio of loans held for investment, by portfolio segment, as of September 30, 2021 and December 31, 2020.
Table 23: 30+ Day Delinquencies
 September 30, 2021December 31, 2020
 30+ Day Performing Delinquencies30+ Day Delinquencies30+ Day Performing Delinquencies30+ Day Delinquencies
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Credit Card:
Domestic credit card$1,912 1.93 %$1,912 1.93 %$2,388 2.42 %$2,388 2.42 %
International card businesses189 3.27 193 3.35 221 2.61 234 2.77 
Total credit card2,101 2.00 2,105 2.00 2,609 2.44 2,622 2.45 
Consumer Banking:
Auto2,730 3.65 2,946 3.94 3,140 4.78 3,381 5.14 
Retail banking27 1.15 49 2.05 41 1.32 62 1.99 
Total consumer banking2,757 3.58 2,995 3.88 3,181 4.62 3,443 5.00 
Commercial Banking:
Commercial and multifamily real estate6 0.02 123 0.37 202 0.66 341 1.11 
Commercial and industrial282 0.61 344 0.75 84 0.19 158 0.35 
Total commercial banking288 0.36 467 0.59 286 0.38 499 0.66 
Total$5,146 1.97 $5,567 2.13 $6,076 2.41 $6,564 2.61 
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.
Table 24 presents our 30+ day delinquent loans, by aging and geography, as of September 30, 2021 and December 31, 2020.
Table 24: Aging and Geography of 30+ Day Delinquent Loans
 September 30, 2021December 31, 2020
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Delinquency status:
30 – 59 days$2,993 1.14 %$3,330 1.32 %
60 – 89 days1,379 0.53 1,485 0.59 
> 90 days
1,195 0.46 1,749 0.70 
Total$5,567 2.13 %$6,564 2.61 %
Geographic region:
Domestic$5,374 2.06 %$6,330 2.52 %
International193 0.07 234 0.09 
Total$5,567 2.13 %$6,564 2.61 %
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by total period-end loans held for investment.
44Capital One Financial Corporation (COF)

Table 25 summarizes loans that were 90+ days delinquent as to interest or principal, and still accruing interest as of September 30, 2021 and December 31, 2020. These loans consist primarily of credit card accounts between 90 days and 179 days past due. As permitted by regulatory guidance issued by the Federal Financial Institutions Examination Council, we continue to accrue interest and fees on domestic credit card loans through the date of charge off, which is typically in the period the account becomes 180 days past due.
Table 25: 90+ Day Delinquent Loans Accruing Interest
 September 30, 2021December 31, 2020
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Loan category:
Credit card$915 0.87 %$1,251 1.17 %
Commercial banking7 0.01 51 0.07 
Total$922 0.35 $1,302 0.52 
Geographic region:
Domestic$848 0.33 %$1,220 0.50 %
International74 1.28 82 0.97 
Total$922 0.35 $1,302 0.52 
__________
(1)Delinquency rates are calculated by dividing delinquency amounts by period-end loans held for investment for each specified loan category.
45Capital One Financial Corporation (COF)

Nonperforming Loans and Nonperforming Assets
Nonperforming assets consist of nonperforming loans, repossessed assets and other foreclosed assets. Nonperforming loans include loans that have been placed on nonaccrual status. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our policies for classifying loans as nonperforming for each of our loan categories.
Table 26 presents our nonperforming loans, by portfolio segment, and other nonperforming assets as of September 30, 2021 and December 31, 2020. We do not classify loans held for sale as nonperforming. We provide additional information on our credit quality metrics in “MD&A—Business Segment Financial Performance.”
Table 26: Nonperforming Loans and Other Nonperforming Assets(1)
 September 30, 2021December 31, 2020
(Dollars in millions)AmountRateAmountRate
Nonperforming loans held for investment:(2)
Credit Card:
International card businesses$9 0.16 %$21 0.24 %
Total credit card9 0.01 21 0.02 
Consumer Banking:
Auto270 0.36 294 0.45 
Retail banking53 2.20 30 0.96 
Total consumer banking323 0.42 324 0.47 
Commercial Banking:
Commercial and multifamily real estate287 0.87 200 0.65 
Commercial and industrial314 0.68 450 1.00 
Total commercial banking601 0.76 650 0.86 
Total nonperforming loans held for investment(3)
$933 0.35 $995 0.40 
Other nonperforming assets(4)
42 0.02 45 0.01 
Total nonperforming assets$975 0.37 $1,040 0.41 
__________
(1)We recognized interest income for loans classified as nonperforming of $21 million and $22 million in the first nine months of 2021 and 2020, respectively. Interest income foregone related to nonperforming loans was $40 million and $40 million in the first nine months of 2021 and 2020, respectively. Foregone interest income represents the amount of interest income in excess of recognized interest income that would have been recorded during the period for nonperforming loans as of the end of the period had the loans performed according to their contractual terms.
(2)Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each respective category.
(3)Excluding the impact of domestic credit card loans, nonperforming loans as a percentage of total loans held for investment was 0.58% and 0.65% as of September 30, 2021 and December 31, 2020, respectively.
(4)The denominators used in calculating nonperforming asset rates consist of total loans held for investment and other nonperforming assets.
46Capital One Financial Corporation (COF)

Net Charge-Offs
Net charge-offs consist of the amortized cost basis, excluding accrued interest, of loans held for investment that we determine to be uncollectible, net of recovered amounts. We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as increases to the allowance for credit losses. Uncollectible finance charges and fees are reversed through revenue and certain fraud losses are recorded in other non-interest expense. Generally, costs to recover charged off loans are recorded as collection expenses as incurred and included in our consolidated statements of income as a component of other non-interest expense. Our charge-off policy for loans varies based on the loan type. See “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K for information on our charge-off policy for each of our loan categories.
Table 27 presents our net charge-off amounts and rates, by portfolio segment, in the third quarter and first nine months of 2021 and 2020.
Table 27: Net Charge-Offs (Recoveries)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
(Dollars in millions)Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Amount
Rate(1)
Credit Card:
Domestic credit card$327 1.36 %$885 3.64 %$1,436 2.05 %$3,359 4.31 %
International card businesses39 2.72 58 2.89 134 2.45 231 3.71 
Total credit card366 1.43 943 3.58 1,570 2.08 3,590 4.26 
Consumer Banking:
Auto34 0.18 36 0.23 90 0.17 445 0.95 
Retail banking17 2.45 12 1.38 41 1.82 41 1.80 
Total consumer banking51 0.27 48 0.28 131 0.24 486 0.99 
Commercial Banking:
Commercial and multifamily real estate1 0.01 32 0.41 9 0.04 39 0.17 
Commercial and industrial8 0.07 50 0.45 (3)(0.01)254 0.73 
Total commercial banking9 0.05 82 0.43 6 0.01 293 0.50 
Total net charge-offs$426 0.67 $1,073 1.72 $1,707 0.92 $4,369 2.28 
Average loans held for investment$253,101 $249,511 $247,867 $255,232 
__________
(1)Net charge-off (recovery) rates are calculated by dividing annualized net charge-offs (recoveries) by average loans held for investment for the period for each loan category.
47Capital One Financial Corporation (COF)

Troubled Debt Restructurings
As part of our loss mitigation efforts, we may provide short-term (three to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for repossession or foreclosure of collateral.
Guidance issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides banking organizations with TDR relief for loan modifications to current borrowers impacted by the COVID-19 pandemic. The majority of enrollments in our COVID-19 programs through September 30, 2021 would generally not have resulted in TDR classification under our existing policies as the concession granted was insignificant. We consider the impact of all loan modifications, including those classified as TDRs and those offered in response to the COVID-19 pandemic, when estimating the credit quality of our loan portfolio and establishing allowance levels.
Table 28 presents our amortized cost of loans modified in TDRs as of September 30, 2021 and December 31, 2020, which excludes loan modifications that do not meet the definition of a TDR and loans that received relief under the guidance issued by the Federal Banking Agencies and contained in the CARES Act in response to the COVID-19 pandemic.
Table 28: Troubled Debt Restructurings
 September 30, 2021December 31, 2020
(Dollars in millions)Amount% of Total ModificationsAmount% of Total Modifications
Credit Card:
Domestic credit card$412 24.2 %$511 24.5 %
International card businesses179 10.5217 10.4 
Total credit card591 34.7728 34.9 
Consumer banking:
Auto600 35.2 615 29.5 
Retail banking12 0.7 18 0.9 
Total consumer banking612 35.9 633 30.4 
Commercial banking500 29.4 723 34.7 
Total$1,703 100.0 %$2,084 100.0 %
Status of TDRs:
Performing$1,357 79.7 %$1,718 82.4 %
Nonperforming346 20.3 366 17.6 
Total$1,703 100.0 %$2,084 100.0 %
In our Credit Card business, the majority of our credit card loans modified in TDRs involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months. The effective interest rate in effect immediately prior to the loan modification is used as the effective interest rate for purposes of measuring impairment using the present value of expected cash flows. If the customer does not comply with the modified payment terms, then the credit card loan agreement may revert to its original payment terms, generally resulting in any loan outstanding reflected in the appropriate delinquency category and charged off in accordance with our standard charge-off policy.
In our Consumer Banking business, the majority of our loans modified in TDRs receive an extension, an interest rate reduction or principal reduction, or a combination of these concessions. In addition, TDRs also occur in connection with bankruptcy of the borrower. In certain bankruptcy discharges, the loan is written down to the collateral value and the charged off amount is reported as principal reduction. Impairment is determined using the present value of expected cash flows or a collateral evaluation for certain auto loans where the collateral value is lower than the amortized cost.
In our Commercial Banking business, the majority of loans modified in TDRs receive an extension, with a portion of these loans receiving an interest rate reduction or a gross balance reduction. The impairment on modified commercial loans is generally determined based on the underlying collateral value.
We provide additional information on modified loans accounted for as TDRs, including the performance of those loans
48Capital One Financial Corporation (COF)

subsequent to modification, in “Note 3—Loans.”
Allowance for Credit Losses and Reserve for Unfunded Lending Commitments
Our allowance for credit losses represents management’s current estimate of expected credit losses over the contractual terms of our loans held for investment as of each balance sheet date. Expected recoveries of amounts previously charged off or expected to be charged off are recognized within the allowance. We also estimate expected credit losses related to unfunded lending commitments that are not unconditionally cancellable. The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets. We provide additional information on the methodologies and key assumptions used in determining our allowance for credit losses in “Note 1—Summary of Significant Accounting Policies” in our 2020 Form 10-K.
Table 29 presents changes in our allowance for credit losses and reserve for unfunded lending commitments for the third quarter and first nine months of 2021 and 2020, and details by portfolio segment for the provision for credit losses, charge-offs and recoveries.
Table 29: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
Three Months Ended September 30, 2021
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2021$8,489 $384 $8,873 $2,122 $81 $2,203 $1,270 $12,346 
Charge-offs(658)(77)(735)(244)(20)(264)(20)(1,019)
Recoveries(1)
331 38 369 210 3 213 11 593 
Net charge-offs(327)(39)(366)(34)(17)(51)(9)(426)
Provision (benefit) for credit losses(200)2 (198)(100)9 (91)(55)(344)
Allowance build (release) for credit losses(527)(37)(564)(134)(8)(142)(64)(770)
Other changes(4)
6 (9)(3)    (3)
Balance as of September 30, 20217,968 338 8,306 1,988 73 2,061 1,206 11,573 
Reserve for unfunded lending commitments:
Balance as of June 30, 2021— — — — — — 164 164 
Provision (benefit) for losses on unfunded lending commitments      2 2 
Balance as of September 30, 2021      166 166 
Combined allowance and reserve as of September 30, 2021$7,968 $338 $8,306 $1,988 $73 $2,061 $1,372 $11,739 
49Capital One Financial Corporation (COF)

Nine Months Ended September 30, 2021
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2020$10,650 $541 $11,191 $2,615 $100 $2,715 $1,658 $15,564 
Charge-offs(2,436)(259)(2,695)(813)(53)(866)(47)(3,608)
Recoveries(1)
1,000 125 1,125 723 12 735 41 1,901 
Net charge-offs(1,436)(134)(1,570)(90)(41)(131)(6)(1,707)
Provision (benefit) for credit losses(1,252)(73)(1,325)(537)14 (523)(446)(2,294)
Allowance build (release) for credit losses(2,688)(207)(2,895)(627)(27)(654)(452)(4,001)
Other changes(4)
6 4 10     10 
Balance as of September 30, 20217,968 338 8,306 1,988 73 2,061 1,206 11,573 
Reserve for unfunded lending commitments:
Balance as of December 31, 2020— — — — — — 195 195 
Provision (benefit) for losses on unfunded lending commitments      (29)(29)
Balance as of September 30, 2021      166 166 
Combined allowance and reserve as of September 30, 2021$7,968 $338 $8,306 $1,988 $73 $2,061 $1,372 $11,739 

Three Months Ended September 30, 2020
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of June 30, 2020$11,569 $522 $12,091 $2,726 $112 $2,838 $1,903 $16,832 
Charge-offs(1,198)(98)(1,296)(280)(15)(295)(88)(1,679)
Recoveries(1)
313 40 353 244 247 606 
Net charge-offs(885)(58)(943)(36)(12)(48)(82)(1,073)
Provision (benefit) for credit losses378 72 450 (43)— (43)(51)356 
Allowance build (release) for credit losses(507)14 (493)(79)(12)(91)(133)(717)
Other changes(2)
— 14 14 — — — — 14 
Balance as of September 30, 202011,062 550 11,612 2,647 100 2,747 1,770 16,129 
Reserve for unfunded lending commitments:
Balance as of June 30, 2020— — — — — — 218 218 
Provision (benefit) for losses on unfunded lending commitments— — — — — — (23)(23)
Balance as of September 30, 2020— — — — — — 195 195 
Combined allowance and reserve as of September 30, 2020$11,062 $550 $11,612 $2,647 $100 $2,747 $1,965 $16,324 
50Capital One Financial Corporation (COF)

Nine Months Ended September 30, 2020
Credit CardConsumer Banking
(Dollars in millions)Domestic CardInternational Card BusinessesTotal Credit CardAutoRetail BankingTotal Consumer BankingCommercial BankingTotal
Allowance for credit losses:
Balance as of December 31, 2019$4,997 $398 $5,395 $984 $54 $1,038 $775 $7,208 
Cumulative effects from adoption of the CECL standard2,237 2,241 477 25 502 102 2,845 
Finance charge and fee reserve reclassification(3)
439 23 462 — — — — 462 
Balance as of January 1, 20207,673 425 8,098 1,461 79 1,540 877 10,515 
Charge-offs(4,406)(351)(4,757)(1,155)(52)(1,207)(303)(6,267)
Recoveries(1)
1,047 120 1,167 710 11 721 10 1,898 
Net charge-offs(3,359)(231)(3,590)(445)(41)(486)(293)(4,369)
Provision (benefit) for credit losses6,748 348 7,096 1,631 62 1,693 1,186 9,975 
Allowance build (release) for credit losses3,389 117 3,506 1,186 21 1,207 893 5,606 
Other changes(2)
— — — — — 
Balance as of September 30, 202011,062 550 11,612 2,647 100 2,747 1,770 16,129 
Reserve for unfunded lending commitments:
Balance as of December 31, 2019— — — — 130 135 
Cumulative effects from adoption of the CECL standard— — — — (5)(5)42 37 
Balance as of January 1, 2020— — — — — — 172 172 
Provision (benefit) for losses on unfunded lending commitments— — — — — — 23 23 
Balance as of September 30, 2020— — — — — — 195 195 
Combined allowance and reserve as of September 30, 2020$11,062 $550 $11,612 $2,647 $100 $2,747 $1,965 $16,324 
__________
(1)The amount and timing of recoveries are impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2)Represents foreign currency translation adjustments.
(3)Concurrent with our adoption of the CECL standard in the first quarter of 2020, we reclassified our finance charge and fee reserve to our allowance for credit losses, with a corresponding increase to credit card loans held for investment.
(4)Represents foreign currency translation adjustments and an initial allowance for purchased credit-deteriorated loans of $6 million.
51Capital One Financial Corporation (COF)

Allowance coverage ratios are calculated based on the allowance for credit losses for each specified portfolio segment divided by period-end loans held for investment within the specified loan category, as defined below. Table 30 presents the allowance coverage ratios as of September 30, 2021 and December 31, 2020.
Table 30: Allowance Coverage Ratios for Specified Loan Category
September 30, 2021December 31, 2020
(Dollars in millions)Allowance for Credit Losses
Amount(1)
Allowance Coverage RatioAllowance for Credit Losses
Amount(1)
Allowance Coverage Ratio
Credit Card$8,306 $2,105 394.50 %$11,191 $2,622 426.80 %
Consumer Banking2,061 2,995 68.83 2,715 3,443 78.85 
Commercial Banking1,206 601 200.51 1,658 650 254.97 
Total$11,573 261,390 4.43 $15,564 251,624 6.19 
__________
(1)Represents period-end 30+ day delinquent loans for our credit card and consumer banking loan portfolios, nonperforming loans for our commercial banking loan portfolio and total loans held for investment for the total ratio.
Our allowance for credit losses decreased by $4.0 billion to $11.6 billion, and our allowance coverage ratio decreased by 176 basis points to 4.43% as of September 30, 2021 from December 31, 2020, driven by strong credit performance and improved economic outlook.
LIQUIDITY RISK PROFILE
We have established liquidity practices that are intended to ensure that we have sufficient asset-based liquidity to cover our funding requirements and maintain adequate reserves to withstand the potential impact of deposit attrition or diminished liquidity in the funding markets. In addition to our cash and cash equivalents, we maintain reserves in the form of investment securities and certain loans that are either readily-marketable or pledgeable.
Table 31 below presents the composition of our liquidity reserves as of September 30, 2021 and December 31, 2020.
Table 31: Liquidity Reserves
(Dollars in millions)September 30, 2021December 31, 2020
Cash and cash equivalents$26,624 $40,509 
Investment securities available for sale, at fair value98,149 100,445 
FHLB borrowing capacity secured by loans7,852 10,162 
Outstanding FHLB advances and letters of credit secured by loans(41)(72)
Investment securities encumbered for Public Funds and others(8,191)(7,052)
Total liquidity reserves$124,393 $143,992 
Our liquidity reserves decreased by $19.6 billion to $124.4 billion as of September 30, 2021 from December 31, 2020 primarily driven by a decrease in cash and cash equivalents. See “MD&A—Risk Management” in our 2020 Form 10-K for additional information on our management of liquidity risk.
52Capital One Financial Corporation (COF)

Liquidity Coverage Ratio
We are subject to the liquidity coverage ratio (“LCR”) standard as implemented by the Federal Reserve and OCC (the “LCR Rule”). The LCR Rule requires us to calculate our LCR daily. It also requires the Company to publicly disclose, on a quarterly basis, its LCR, certain related quantitative liquidity metrics, and a qualitative discussion of its LCR. Our average LCR during the third quarter of 2021 was 143%, which exceeded the LCR Rule requirement of 100%. The calculation and the underlying components are based on our interpretations, expectations and assumptions of relevant regulations, as well as interpretations provided by our regulators, and are subject to change based on changes to future regulations and interpretations. See “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K for additional information.
Net Stable Funding Ratio
In October 2020, the Federal Banking Agencies finalized a rule to implement the Net Stable Funding Ratio in the United States (the “NSFR Rule”). The NSFR Rule requires the Company and each of the Banks to maintain an amount of available stable funding, which is a weighted measure of a company’s funding sources over a one-year time horizon, calculated by applying standardized weightings to equity and liabilities based on their expected stability, that is no less than the amount of required stable funding, which is calculated by applying standardized weightings to assets, derivatives exposures and certain other items based on their liquidity characteristics. As a Category III institution, the Company and the Banks are required to maintain available stable funding in an amount at least equal to 85% of its required stable funding. The NSFR Rule became effective on July 1, 2021 and applies to the Company and each of the Banks. The NSFR Rule includes a semi-annual disclosure requirement, with the first public disclosure required after June 30, 2023.
Borrowing Capacity
We maintain a shelf registration with the U.S. Securities and Exchange Commission (“SEC”) so that we may periodically offer and sell an indeterminate aggregate amount of senior or subordinated debt securities, preferred stock, depositary shares, common stock, purchase contracts, warrants and units. There is no limit under this shelf registration to the amount or number of such securities that we may offer and sell, subject to market conditions. In addition, we also maintain a shelf registration that allows us to periodically offer and sell up to $25 billion of securitized debt obligations from our credit card loan securitization trust and a shelf registration that allows us to periodically offer and sell up to $20 billion from our auto loan securitization trusts.
In addition to our issuance capacity under the shelf registration statements, we also have access to FHLB advances and the Federal Reserve Discount Window. The ability to borrow utilizing these sources is based on membership status and the amount is dependent upon the Banks’ ability to post collateral. As of September 30, 2021, we pledged both loans and securities to the FHLB to secure a maximum borrowing capacity of $18.8 billion, of which $41 million was used. Our FHLB membership is supported by our investment in FHLB stock of $32 million and $30 million as of September 30, 2021 and December 31, 2020, respectively, which was determined in part based on our outstanding advances. As of September 30, 2021, we pledged loans to secure a borrowing capacity of $19.9 billion under the Federal Reserve Discount Window. Our membership with the Federal Reserve is supported by our investment in Federal Reserve stock, which totaled $1.3 billion as of both September 30, 2021 and December 31, 2020.
Funding
Our primary source of funding comes from deposits, as they are a stable and relatively low cost source of funding. In addition to deposits, we raise funding through the issuance of senior and subordinated notes and securitized debt obligations, federal funds purchased, securities loaned or sold under agreements to repurchase and FHLB advances secured by certain portions of our loan and securities portfolios. A key objective in our use of these markets is to maintain access to a diversified mix of wholesale funding sources. See “MD&A—Consolidated Balance Sheets Analysis—Funding Sources Composition” for additional information on our primary sources of funding.
53Capital One Financial Corporation (COF)

Deposits
Table 32 provides a comparison of average balances, interest expense and average deposits interest rates for the third quarter and first nine months of 2021 and 2020.
Table 32: Deposits Composition and Average Deposits Interest Rates
Three Months Ended September 30,
20212020
(Dollars in millions)Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$45,511 $19 0.17 %$38,115 $25 0.26 %
Saving deposits(2)
202,955 156 0.30 196,575 287 0.58 
Time deposits less than $100,00014,796 42 1.12 26,626 112 1.67 
Total interest-bearing core deposits263,262 217 0.33 261,316 424 0.65 
Time deposits of $100,000 or more6,016 11 0.70 15,023 52 1.40 
Total interest-bearing deposits$269,278 $228 0.34 $276,339 $476 0.69 
Nine Months Ended September 30,
20212020
(Dollars in millions)Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Average
Balance
Interest
Expense
Average
Deposits
Interest Rate
Interest-bearing checking accounts(1)
$44,153 $56 0.17 %$36,201 $106 0.39 %
Saving deposits(2)
203,127 472 0.31 179,643 1,085 0.81 
Time deposits less than $100,00017,136 153 1.19 27,477 407 1.98 
Total interest-bearing core deposits264,416 681 0.34 243,321 1,598 0.88 
Time deposits of $100,000 or more7,606 53 0.93 16,310 220 1.81 
Total interest-bearing deposits$272,022 $734 0.36 $259,631 $1,818 0.93 
__________
(1)Includes negotiable order of withdrawal accounts.
(2)Includes money market deposit accounts.
The FDIC limits the acceptance of brokered deposits to well-capitalized insured depository institutions and, with a waiver from the FDIC, to adequately-capitalized institutions. COBNA and CONA were well-capitalized, as defined under the federal banking regulatory guidelines, as of September 30, 2021 and December 31, 2020, respectively. See “Part I—Item 1. Business—Supervision and Regulation” in our 2020 Form 10-K for additional information. We provide additional information on the composition of deposits in “MD&A—Consolidated Balance Sheets Analysis—Funding Sources Composition” and in “Note 7—Deposits and Borrowings.”
Short-Term Borrowings and Long-Term Debt
We access the capital markets to meet our funding needs through the issuance of senior and subordinated notes, securitized debt obligations and federal funds purchased and securities loaned or sold under agreements to repurchase. In addition, we may utilize short-term and long-term FHLB advances secured by certain of our investment securities, multifamily real estate loans and commercial real estate loans.
Our short-term borrowings include those borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. The short-term borrowings, which consist of federal funds purchased, securities loaned or sold under agreements to repurchase, increased by $157 million to $825 million as of September 30, 2021 from December 31, 2020 driven by an increase in repurchase agreement activity.
Our long-term debt, which primarily consists of securitized debt obligations and senior and subordinated notes, decreased by $3.2 billion to $36.7 billion as of September 30, 2021 from December 31, 2020 primarily driven by redemptions of our senior debt, partially offset by the issuance of subordinated debt. We provide more information on our securitization activity in “Note 5—Variable Interest Entities and Securitizations.”
54Capital One Financial Corporation (COF)

The following table summarizes issuances of securitized debt obligations, senior and subordinated notes and their respective maturities or redemptions for the third quarter and first nine months of 2021 and 2020.
Table 33: Long-Term Funding
IssuancesMaturities/Redemptions
Three Months Ended September 30,Three Months Ended September 30,
(Dollars in millions)2021202020212020
Securitized debt obligations$3,000 $— $865 $2,159 
Senior and subordinated notes1,000 — 1,766 — 
Total$4,000 $ $2,631 $2,159 
IssuancesMaturities/Redemptions
Nine Months Ended September 30,Nine Months Ended September 30,
(Dollars in millions)2021202020212020
Securitized debt obligations$3,000 $1,250 $2,638 $5,752 
Senior and subordinated notes1,000 4,000 3,851 7,092 
Total$4,000 $5,250 $6,489 $12,844 
Credit Ratings
Our credit ratings impact our ability to access capital markets and our borrowing costs. Rating agencies assign their ratings based on numerous factors, including liquidity, capital adequacy, asset quality, quality of earnings and the probability of systemic support. Significant changes in these factors could result in different ratings.
Table 34 provides a summary of the credit ratings for the senior unsecured long-term debt of Capital One Financial Corporation, COBNA and CONA as of September 30, 2021 and December 31, 2020.
Table 34: Senior Long-Term Debt Credit Ratings
September 30, 2021December 31, 2020
Capital One
Financial
Corporation
COBNACONACapital One
Financial
Corporation
COBNACONA
Moody’sBaa1A3A3Baa1Baa1Baa1
S&PBBBBBB+BBB+BBBBBB+BBB+
FitchA-AAA-A-A-
As of October 25, 2021, Moody’s Investors Service (“Moody’s”), Standard & Poor’s (“S&P”) and Fitch Ratings (“Fitch”) have our credit ratings on a stable outlook.
MARKET RISK PROFILE
Market risk is the risk of economic loss in the value of our financial instruments due to changes in market factors. Our primary market risk exposures include interest rate risk, foreign exchange risk and commodity pricing risk. We are exposed to market risk primarily from the following operations and activities:
Traditional banking activities of deposit gathering and lending;
Asset/liability management activities including the management of investment securities, short-term and long-term borrowings and derivatives;
Foreign operations in the U.K. and Canada within our Credit Card business; and
Customer accommodation activities within our Commercial Banking business.
55Capital One Financial Corporation (COF)

We have enterprise-wide risk management policies and limits, approved by our Board of Directors, which govern our market risk management activities. Our objective is to manage our exposure to market risk in accordance with these policies and limits based on prevailing market conditions and long-term expectations. We provide additional information below about our primary sources of market risk, our market risk management strategies and the measures that we use to evaluate these exposures.
Interest Rate Risk
Interest rate risk represents exposure to financial instruments whose values vary with the level or volatility of interest rates. We are exposed to interest rate risk primarily from the differences in the timing between the maturities or re-pricing of assets and liabilities. We manage our interest rate risk primarily by entering into interest rate swaps and other derivative instruments which could include caps, floors, options, futures and forward contracts.
We use various industry standard market risk measurement techniques and analyses to measure, assess and manage the impact of changes in interest rates on our net interest income and our economic value of equity and changes in foreign exchange rates on our non-dollar-denominated funding and non-dollar equity investments in foreign operations.
Net Interest Income Sensitivity
Our net interest income sensitivity measure estimates the impact on our projected 12-month baseline net interest income resulting from movements in interest rates. In addition to our existing assets and liabilities, we incorporate expected future business growth assumptions, such as loan and deposit growth and pricing, and plans for projected changes in our funding mix in our baseline forecast. In measuring the sensitivity of interest rate movements on our projected net interest income, we assume a hypothetical instantaneous parallel shift in the level of interest rates detailed in Table 35 below. At the current level of interest rates, our net interest income is expected to increase in higher rate scenarios and decrease modestly in lower rate scenarios. Our current sensitivity to upward shocks has decreased as compared to December 31, 2020, mainly due to the increase in long-term interest rates and a decrease in cash balance.
Economic Value of Equity
Our economic value of equity sensitivity measure estimates the impact on the net present value of our assets and liabilities, including derivative exposures, resulting from movements in interest rates. Our economic value of equity sensitivity measure is calculated based on our existing assets and liabilities, including derivatives, and does not incorporate business growth assumptions or projected balance sheet changes. Key assumptions used in the calculation include projecting rate sensitive prepayments for mortgage securities, loans and other assets, term structure modeling of interest rates, discount spreads, and deposit volume and pricing assumptions. In measuring the sensitivity of interest rate movements on our economic value of equity, we assume a hypothetical instantaneous parallel shift in the level of interest rates detailed in Table 35 below. Our current economic value of equity sensitivity profile demonstrates that our economic value of equity increases in higher interest rate scenarios, while decreasing in a lower interest rate scenario. Similar to the changes in net interest income sensitivity, our current economic value of equity sensitivity to upward shocks has also decreased as compared to December 31, 2020 mainly due to the increase in long term interest rates and a decrease in cash balance.
Table 35 shows the estimated percentage impact on our projected baseline net interest income and economic value of equity calculated under the methodology described above as of September 30, 2021 and December 31, 2020. In instances where an interest rate scenario would result in a rate less than 0%, we assume a rate of 0% for that scenario. This assumption applies only to jurisdictions that do not have negative policy rates. In jurisdictions that have negative policy rates, we do not floor interest rates at 0%.
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Table 35: Interest Rate Sensitivity Analysis
September 30, 2021December 31, 2020
Estimated impact on projected baseline net interest income:
+200 basis points4.3 %5.6 %
+100 basis points3.4 4.3 
+50 basis points1.9 2.4 
–50 basis points(1.4)(0.9)
Estimated impact on economic value of equity:
+200 basis points0.7 4.2 
+100 basis points2.8 6.0 
+50 basis points2.0 4.0 
–50 basis points(3.4)(7.0)
In addition to these industry standard measures, we also consider the potential impact of alternative interest rate scenarios, such as stressed rate shocks as well as steepening and flattening yield curve scenarios in our internal interest rate risk management decisions.
Limitations of Market Risk Measures
The interest rate risk models that we use in deriving these measures incorporate contractual information, internally-developed assumptions and proprietary modeling methodologies, which project borrower and depositor behavior patterns in certain interest rate environments. Other market inputs, such as interest rates, market prices and interest rate volatility, are also critical components of our interest rate risk measures. We regularly evaluate, update and enhance these assumptions, models and analytical tools as we believe appropriate to reflect our best assessment of the market environment and the expected behavior patterns of our existing assets and liabilities.
There are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. The sensitivity analysis described above contemplates only certain movements in interest rates and is performed at a particular point in time based on the existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. The strategic actions that management may take to manage our balance sheet may differ significantly from our projections, which could cause our actual earnings and economic value of equity sensitivities to differ substantially from the above sensitivity analysis.
For further information on our interest rate exposures, see “Note 8—Derivative Instruments and Hedging Activities.”
Foreign Exchange Risk
Foreign exchange risk represents exposure to changes in the values of current holdings and future cash flows denominated in other currencies. We are exposed to foreign exchange risk primarily from the intercompany funding denominated in pound sterling (“GBP”) and the Canadian dollar (“CAD”) that we provide to our businesses in the U.K. and Canada and net equity investments in those businesses. We are also exposed to foreign exchange risk due to changes in the dollar-denominated value of future earnings and cash flows from our foreign operations and from our Euro (“EUR”)-denominated borrowings.
Our non-dollar denominated intercompany funding and EUR-denominated borrowings expose our earnings to foreign exchange transaction risk. We manage these transaction risks by using forward foreign currency derivatives and cross-currency swaps to hedge our exposures. We measure our foreign exchange transaction risk exposures by applying a 1% U.S. dollar appreciation shock against the value of the non-dollar denominated intercompany funding and EUR-denominated borrowings and their related hedges, which shows the impact to our earnings from foreign exchange risk. Our intercompany funding outstanding was 415 million GBP and 320 million GBP as of September 30, 2021 and December 31, 2020, respectively, and 4.7 billion CAD and 5.3 billion CAD as of September 30, 2021 and December 31, 2020, respectively. Our EUR-denominated borrowings outstanding were 1.3 billion EUR as of both September 30, 2021 and December 31, 2020.
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Our non-dollar equity investments in foreign operations expose our balance sheet to translation risk in AOCI and our capital ratios. We manage our AOCI exposure by entering into foreign currency derivatives designated as net investment hedges. We measure these exposures by applying a 30% U.S. dollar appreciation shock, which we believe approximates a significant adverse shock over a one-year time horizon, against the value of the equity invested in our foreign operations net of related net investment hedges where applicable. Our gross equity exposures in our U.K. and Canadian operations were 1.8 billion GBP and 1.7 billion GBP as of September 30, 2021 and December 31, 2020, respectively, and 1.8 billion CAD and 1.5 billion CAD as of September 30, 2021 and December 31, 2020, respectively.
As a result of our derivative management activities, we believe our net exposure to foreign exchange risk is minimal.
Risk related to Customer Accommodation Derivatives
We offer interest rate, commodity and foreign currency derivatives as an accommodation to our customers within our Commercial Banking business. We offset the majority of the market risk of these customer accommodation derivatives by entering into offsetting derivatives transactions with other counterparties. We use value-at-risk (“VaR”) as the primary method to measure the market risk in our customer accommodation derivative activities on a daily basis. VaR is a statistical risk measure used to estimate the potential loss from movements observed in the recent market environment. We employ a historical simulation approach using the most recent 500 business days and use a 99 percent confidence level and a holding period of one business day. As a result of offsetting our customer exposures with other counterparties, we believe that our net exposure to market risk in our customer accommodation derivatives is minimal. For further information on our risk related to customer accommodation derivatives, see “Note 8—Derivative Instruments and Hedging Activities.”
London Interbank Offered Rate (“LIBOR”) Transition
On July 27, 2017, the U.K. Financial Conduct Authority (“FCA”), the regulator for the administration of LIBOR, announced that LIBOR would be transitioned as an interest rate benchmark and that it will no longer compel banks to contribute LIBOR data beyond December 31, 2021.
On March 5, 2021, the ICE Benchmark Administration (“IBA”), the administrator of LIBOR, confirmed its intention to cease publication of the 1-week and 2-month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR tenors (overnight; 1, 3, 6, and 12 months) immediately following the LIBOR publication on June 30, 2023. The continuation of USD LIBOR as a representative rate into mid-2023 will allow many legacy USD LIBOR contracts to mature prior to cessation. Following IBA’s announcement, the FCA formally announced the future permanent cessation and loss of representativeness of LIBOR benchmarks.

In the U.S., the Secured Overnight Financing Rate (“SOFR”) has been selected as the preferred alternative rate for certain U.S. dollar derivative and cash instruments. While SOFR continues to be the industry recommended replacement rate for LIBOR, some market participants have begun using alternate rates featuring a credit-sensitive element. We are continuing to evaluate the different LIBOR alternatives and how their progression will impact our transition efforts.
We have exposures to LIBOR, including loans, derivative contracts, unsecured debt, securitizations, vendor agreements and other instruments with attributes that are either directly or indirectly dependent on LIBOR. To facilitate an orderly transition from LIBOR, we have established a company-wide, cross-functional initiative to oversee and manage our transition away from LIBOR and other Interbank Offered Rates (“IBORs”) to alternative reference rates.
We have made progress on our transition efforts as we continue to insert LIBOR transition language (“fallback language”) in new and existing lending contracts as well as in derivatives contracts and agreements that adheres to the International Swaps and Derivatives Association (“ISDA”) fallback protocol. Furthermore, we continue to originate loans and transact in instruments indexed to SOFR and other LIBOR replacement rates.
We also continue to focus our transition efforts on:
monitoring market developments and managing our activities related to SOFR and other LIBOR replacement indexes;
reviewing existing legal contracts and agreements and assessing fallback language impacts;
monitoring and reducing our inventory of LIBOR exposures;
building internal operational readiness and risk management processes, including exposure reporting;
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implementing necessary updates to our infrastructure including systems, models, valuation tools and processes; and
engaging with our clients, industry working groups, and regulators.
For a further discussion of the various risks we face in connection with the expected replacement of LIBOR on our operations, see “Part I—Item 1A. Risk Factors—Uncertainty regarding, and transition away from, LIBOR may adversely affect our business” in our 2020 Form 10-K.
SUPERVISION AND REGULATION
We provide information on our Supervision and Regulation in our 2020 Form 10-K under “Part I—Item 1. Business—Supervision and Regulation” and in our Quarterly Reports on Form 10-Q for the period ended March 31, 2021 and for the period ended June 30, 2021 under “Part I—Item 2. MD&A—Supervision and Regulation.”
FORWARD-LOOKING STATEMENTS
From time to time, we have made and will make forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, capital allocation plans, accruals for claims in litigation and for other claims against us; earnings per share, efficiency ratio, operating efficiency ratio, or other financial measures for us; future financial and operating results; our plans, objectives, expectations and intentions; and the assumptions that underlie these matters.
To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward-looking statements made by us or on our behalf speak only as of the date they are made or as of the date indicated, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. For additional information on factors that could materially influence forward-looking statements included in this Report, see the risk factors set forth under “Part I—Item 1A. Risk Factors” in our 2020 Form 10-K. You should carefully consider the factors discussed above, and in our Risk Factors or other disclosure, in evaluating these forward-looking statements.
Numerous factors could cause our actual results to differ materially from those described in such forward-looking statements, including, among other things:
the impact of the COVID-19 pandemic and related public health measures on our business, financial condition and results of operations, including the increased estimation and forecast uncertainty as a result of the pandemic on our estimates of lifetime expected credit losses in our loan portfolios required in computing our allowance for credit losses;
general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, tariffs, collateral values, consumer income, creditworthiness and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity;
an increase or decrease in credit losses, or increased delinquencies, including increases due to a worsening of general economic conditions in the credit environment, and the impact of inaccurate estimates or inadequate reserves;
compliance with new and existing laws, regulations and regulatory expectations including the implementation of a regulatory reform agenda;
our ability to manage adequate capital or liquidity levels, which could have a negative impact on our financial results and our ability to return capital to our stockholders;
the extensive use, reliability, disruption, and accuracy of the models and data we rely on;
increased costs, reductions in revenue, reputational damage, legal liability and business disruptions that can result from data protection or privacy incidents or the theft, loss or misuse of information, including as a result of a cyber-attack;
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developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement action or matter involving us;
the amount and rate of deposit growth and changes in deposit costs;
our ability to execute on our strategic and operational plans;
our response to competitive pressures;
our business, financial condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit card networks and by legislation and regulation impacting such fees;
our success in integrating acquired businesses and loan portfolios, and our ability to realize anticipated benefits from announced transactions and strategic partnerships;
our ability to maintain a compliance, operational, technology and organizational infrastructure suitable for the nature of our business;
the success of our marketing efforts in attracting and retaining customers;
our risk management strategies;
changes in the reputation of, or expectations regarding, the financial services industry or us with respect to practices, products or financial condition;
increases or decreases in interest rates and uncertainty with respect to the interest rate environment, including the possibility of a prolonged low-interest rate environment or of negative interest rates;
uncertainty regarding, and transition away from, the London Interbank Offered Rate;
our ability to attract, retain and motivate skilled employees;